FLO International Adjusts Fairtrade Minimum Prices for Arabica Coffee to Cover Costs of Sustainable Production

13 December 2007

Fairtrade continues to address the needs of coffee producing communities

Fairtrade Minimum Prices for Arabica coffee will be adjusted upwards to ensure Small Farmers’ Organisations continue to receive a price which covers the costs of sustainable production. From 1 June 2008 all Fairtrade Certified coffee producers will receive at least 125 USD cents per pound for Fairtrade certified washed Arabica and 120 USD cents for unwashed Arabica, or the market price, if higher. This represents an average increase of 5 USD cents per pound. For Fairtrade Certified organic coffee an extra minimum differential of 20 cents is being applied.  Additionally, all producers will continue to receive a Fairtrade Premium of 10 cents per pound for investment in community and business improvements. These new Fairtrade Minimum Prices will be valid through at least June 2010, when another price review may take place.

Coffee is the most important Fairtrade Certified product in terms of the number of Fairtrade Certified coffee producer organizations and their members who are directly benefiting from its sales under Fairtrade terms.  At the end of 2007, there are more than 250 Fairtrade Certified coffee producer organizations in Africa, Asia, and Latin America. In the context of the volatile international coffee market and the wildly fluctuating prices of this primary commodity, the Fairtrade Minimum Price makes a substantial difference to the lives of small farmers by bringing them stability that enables them to plan ahead. Meanwhile, Fairtrade Premiums can be invested in community programmes, quality improvement to attract higher value markets, or  diversification to reduce dependency on one commodity.

“I represent over one million people in Latin America who need the security of the Fairtrade Minimum Prices in order to continue living and working on their land with dignity,” said Raúl del Águila, a Peruvian coffee farmer, President of the Latin American Fairtrade Producers Network (CLAC) and a FLO Board member. “No other certification system but Fairtrade guarantees that small producers get a decent return for their hard work.  Consumers can be certain that this increase will help uplift living standards and have a direct and positive impact on the lives of Fairtrade Certified coffee farmers around the world”.

The increase in the Fairtrade Minimum Prices for Arabica was adopted unanimously by the FLO Board – a groundbreaking agreement in terms of the increase and the timing of implementation. The review of the Fairtrade Minimum Prices for Arabica represents an achievement for all the stakeholders of the Fairtrade Labelling System: farmers get a price which covers the cost of sustainable production while ensuring that Fairtrade Certified coffee continues to be attractive in the market.

“Fairtrade is good for farmers and good for our coffee business,” commented Rick Peyser, Director of Social Advocacy and Coffee Community Outreach for Green Mountain Coffee Roasters and a member of FLO’s Board of Directors. “Fairtrade strengthens our supply chain and gives farmers the resources they need to provide for their families and produce extremely high quality coffee. Quality is essential to ensuring long-term growth in consumer demand for Fairtrade. We support the price increase because it will maintain quality and help make the farmers stronger business partners.”

Coffee price review  

The decision to increase Fairtrade Minimum Prices for Arabica is the result of a year long process that is based on analysis of costs of sustainable production, the needs of producers to invest in their organizations and communities as well as Fairtrade market conditions. In a first phase of the review process, the FLO Standards Committee agreed on the immediate need to increase the Fairtrade Premium as well as the organic differential for all Fairtrade Certified coffees (Arabica and Robusta), both with 5 USD cents per pound. This decision was implemented in June 2007. As the process to assess cost of sustainable production was much more complex, the review of the Fairtrade Minimum Prices continued until October 2007. A coffee advisory group consisting of producers and buyers was formed to help FLO’s Standards Unit analyze information and provided expertise and insight into the Fairtrade coffee market. 
Along with this advisory group, a large number of producer organisations, coffee roasters and importers participated in the consultation process. With the support of the Fairtrade Labelling Initiatives and Producer Networks, FLO has obtained feedback from a large panorama of stakeholders within the Fairtrade movement. The quantity and quality of the comments have helped FLO to take a well-balanced decision that will support real sustainable development based on the mutual commitment of both consumers and producers.

Rationale of price decision

The FLO Standards Committee and FLO Board have decided to increase the Fairtrade Minimum Prices for Arabica for the following reasons:

  • The costs of sustainable production have increased: In September 2007 the FLO Standards Committee agreed that the data gathered on costs of sustainable production sufficiently indicated that a price increase for Arabica coffee was warranted. In particular, higher costs of labour and certain inputs (such as oil) have had an impact on overall production costs.
  • An assessment of Fairtrade prices in comparison with inflation and exchange rates indicated that in the last three years the Fairtrade Minimum Prices for Arabica received by producers have devalued in local currency in most countries. In some countries the depreciation of the US dollar has diminished producer income considerably.
  • Remuneration for investing in a better production system: the Fairtrade definition of “sustainable” has expanded and FLO now requires Fairtrade Certified producers to comply with stricter standards and make greater strides to protect the environment. The Fairtrade Labelling System is also encouraging greater investment in production techniques to improve quality.

Ensuring that Fairtrade Certified producers receive adequate remuneration for their labour and investment in sustainable production is a central principle of Fairtrade, and therefore FLO Standards. The adjustment of the Minimum Prices for Arabica is therefore entirely in-line with the vision and mission of the Fairtrade Labelling System.    

According to Ian Bretman, Deputy Director of the Fair Trade Foundation in the United Kingdom and FLO Board member, "The concerned consumer demands high-quality products that make a positive difference. The evidence is clear: consumers are willing to pay more for Fairtrade products because they help lift farmers out of poverty. This moderate price increase in Fairtrade coffee strengthens that proposition and reassures consumers that Fairtrade truly delivers on its promise of farmer empowerment."

At this stage FLO has decided not to change the Fairtrade Minimum Prices for Robusta coffee. Although FLO is concerned that the costs of producing Robusta coffee has been on the increase, there is currently not sufficient evidence that the Fairtrade Minimum Prices are no longer covering the cost of sustainable production.

Along with this exciting step forward for the Fairtrade Labelling System, FLO and the Fairtrade Labelling Initiatives are committed to an on-going dialogue between producers and consumers. FLO wants to ensure that buyers of Fairtrade coffee are fully informed of the impact that is made by their purchases. In order to underline this, producers themselves, such as the Latin American Producer Network, are dedicated to working with Labelling Initiatives on publicizing the importance of Fairtrade for improving their livelihoods.

If you have further questions, please contact Veronica Perez in the FLO's communications team at: v.perez@fairtrade.net 
Telephone +49-228-949-2314 

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