Living Income Reference Prices
The price a farmer earns for their crop is just one of the necessary elements of a living income. Fairtrade has pioneered a model for setting Living Income Reference Prices that can be used by any company to pay their fair share toward decent livelihoods for farmers.
A sector can never be sustainable if the farmers at the beginning of the supply chain aren’t able to make a decent living from the sales of their crop. That's why going beyond the Fairtrade Minimum Price and Premium, we developed the concept of a Living Income Reference Price.
Starting with cocoa in Ghana and Côte d’Ivoire in 2018, we now have reference prices for eight products and almost 20 countries.
Visit our interactive reference prices map to look up prices and the calculations behind them.
What is a Living Income Reference Price (LIRP)?
This is the price a typical farmer household with a viable farm size and a sustainable productivity level needs in order to earn a living income from the sales of their crop.
Fairtrade establishes generic Living Income Reference Prices for several core products, including cocoa and coffee, as well as coconuts, cashews, mango, oranges, rice and vanilla. These prices are set at country level, following a robust process of farm economic data analysis and stakeholder consultation, and can be used by any buyer.
We also calculate Living Income Reference Prices on demand, catering to businesses seeking tailored services for their supply chains.
You can access our Living Income Reference Prices by commodity or country via our interactive Living Income Reference Price tool.
How do we calculate Living Income Reference Prices?
We use four key parameters:
- Costs to support a decent living (living income benchmarks)
- Sustainable target yield (productivity benchmark)
- Costs of sustainable production (investment required to attain the target yield and pay a living wage to any hired labour)
- Viable crop area (to fully absorb the available household labour)
The costs of a decent living (or 'living income benchmark’) are established for an average household in a specific country or region using the Anker methodology and include: food expenditures (other than food that is produced on the farm for home consumption), decent housing, education, healthcare, clothing and other essentials, as well as a small provision for unexpected events.
The sustainable target yield is arrived at through consultation with in-country experts including farmers, and aims to represent a realistic and sustainable productivity level based on local conditions and realities
The production costs are based on the adoption of sustainable agricultural practices required to reach the target productivity level, such as replacing old trees on a regular schedule and using adequate inputs. If external workers need to be hired to supplement the labour of household members, the costs to pay those workers a living wage are also included.
The viable crop area is calculated based on the average farming household size in the country or region, such that the available adult household labour can be fully employed on the farm.
Contact us for more information on working with Fairtrade along the shared path towards living incomes for farmers. It’s the right thing to do – for farmers, for rural communities, and for a more just and sustainable world.