BONN, GERMANY - To help companies take action to improve farmer incomes, Fairtrade is now offering a streamlined process to develop origin prices that support living incomes for any certified product grown by smallholder farmers.

The “Living Income Reference Price on demand,” or “LIRP on demand,” offering is an extension of Fairtrade’s data-driven globally recognised model for developing Living Income Reference Prices, which is the price a typical farmer household with a viable farm size and a sustainable productivity level needs to receive to achieve a living income from the sales of their crop.

Fairtrade has developed a five-step approach to estimate precise Living Income Reference Price solutions. The approach includes a pre-assessment process, where Fairtrade identifies the product and origin specifications for which reference prices should be generated, as well as where all relevant inputs and work steps needed are mapped out along with the time necessary for each step; the definition of the sustainable model, where the local context and product knowledge is used to contextualise the model to optimally reflect the reality that farmers are facing; data collection and analysis, where data is gathered through qualitative methods and then Fairtrade analyses the data to estimate key parameters of the pricing model and a first approximation of what a LIRP could look like; stakeholder validation, here the parameter values and the provisional reference price are presented to key stakeholders in a validation workshop; and finally the report stage, where Fairtrade creates a written report to explain model and parameter values, as well as the resulting reference price. This approach was optimised through 27 case studies in 19 countries.

The “LIRP on demand” can be completed between three and six months. And to ensure the validity of the prices, the service offer includes annual updates for inflation for four years.

“We believe that businesses must play a part in achieving sustainable livelihoods for farmers, and we see momentum in the market from leading retailers and brands,” said Carla Veldhuyzen van Zanten, Senior Advisor of Sustainable Livelihoods at Fairtrade International.

Fairtrade established its first Living Income Reference Price for cocoa in 2019, and since then has carefully estimated prices for products such as coffee, vanilla, coconuts, mangos, and rice. In 2022, Fairtrade calculated a Living Income Reference Price for conventional cashews from Tanzania for the brand Johnny Cashew. The data collected from 120 farmers from one producer organisation was analysed and has now been adopted by Johnny Cashew in their supply chain.

To participate in our upcoming webinar about the new living income reference price resources can work for companies, register here. To learn more about Fairtrade’s Living Income Reference Prices click here.