30 Mar 2023

Fairtrade Increases Coffee Minimum Price As Farmers Face Mounting Economic and Climate Pressures

Living Income Project Colombia
© Lorena Velasco Hurtado

BONN, Germany – Fairtrade will raise its Minimum Price for coffee in an effort to strengthen protections for coffee farmers around the world amid the intensifying impacts of climate change and growing global economic volatility, the social justice organization today confirmed.

The new Fairtrade prices, which come into effect for contracts signed as of 1 August 2023, will increase the baseline price by 19 percent and 29 percent for Fairtrade certified Robusta and Arabica coffee, respectively. This will provide farmers with significant price risk management support in times of wild market fluctuation, and adapt to their needs as they face inflation in their home countries and substantial additional costs due to climate change adaption. The new Fairtrade Minimum Price for washed Arabica beans – which represent more than 80 percent of all Fairtrade coffee sold – is $1.80 per pound, an increase of 40 cents over the previous price of $1.40 per pound. For natural Robusta, the price will increase by 19 cents to $1.20 per pound. The additional value for organic Fairtrade coffee has been increased by a third, from 30 cents to 40 cents per pound. More than half of Fairtrade coffee beans sold in 2021 were also organic certified.

“Despite the recent spikes in global coffee prices, coffee farmers are struggling with inflation, skyrocketing production costs, and crop loss due to the effects of climate change. Many coffee farmers are abandoning their farms in search of opportunities elsewhere and young people today in coffee-growing communities struggle to see a future in coffee. The fact that farmers cannot make a living in coffee is a tragic commentary for the industry and a huge risk for the future of the global coffee sector as a whole,” said Monika Firl, Senior Manager for Coffee at Fairtrade International.

“With the new Fairtrade Minimum Price, Fairtrade is offering coffee farmers and their cooperatives a pricing safety net, better adapted to the uncertain times we are living in, while leaving the door open for them to earn more when market prices are above the Fairtrade Minimum Price,” Ms. Firl continued. “This is an essential tool that coffee farmers must be allowed to leverage in order to find renewed stability in their profession.”

Fairtrade’s global coffee network is vast and diverse, comprising nearly 900,000 certified coffee farmers in over 650 producer organizations spanning 31 countries. In addition to the protective support of the Fairtrade Minimum Price, Fairtrade-certified farmers also receive a Premium – an additional sum of money that is collectively invested in projects to improve productivity, climate adaptation, quality, infrastructure, and basic community services identified as priorities by the farmers themselves and their organizations. Since 2017, Fairtrade certified coffee producer organizations earned more than €400 million in Premium which they invested in a range of initiatives spanning business development, infrastructure and agricultural improvement, and social services.

Nevertheless, coffee farmers continue to face dramatic challenges. According to available data, smallholder farmers produce 60 percent of the world’s coffee yet nearly half of those smallholder farmers are living in poverty; nearly a quarter of them live in extreme poverty. And although coffee prices in 2022 were relatively high, profits ultimately failed to trickle down to the farmers themselves. Studies, in fact, have shown that producers typically retain around 1 percent of the retail coffee price which, for a $4 USD cup of coffee, equals around $0.04 USD per cup.

“The Fairtrade Minimum Price is critical for coffee farmers as it cushions them from the unpredictable fluctuations they face on the coffee market. But the situation coffee farmers endure globally due to financial hardships and climate change remains unsustainable and, quite frankly, puts the entire future of coffee at risk,” warned Silvia Gonzalez, Manager at the Nicaraguan coffee producer UCA Miraflor and Board Member at Fairtrade regional producer network CLAC.

“If we’re going to be serious about tackling poverty in the global supply chain, then everyone in the supply chain – from consumers to retailers to traders – must do their part and pay farmers their fair share,” Ms. Gonzalez added.

Going beyond the mandatory Fairtrade Minimum Price, the organisation has also developed Living Income Reference Prices for some countries, indicating what farmers would need to receive to be able to earn a living income from their coffee, given certain parameters. Buyers are encouraged to pay these prices on a voluntary basis and support farmers to make progress toward living incomes as part of a holistic strategy. The new Fairtrade Minimum Price and organic differential combined have reached the export-equivalent values of the Living Income Reference Prices in two of the four coffee origins for which Fairtrade has set the reference prices: Colombia and Uganda, both for organic Arabica. For the other two origins, the new Fairtrade Minimum Price and organic differential will close the gap to the respective Living Income Reference Prices by 45 percent (Indonesia’s Aceh region) and 46 percent (Honduras), respectively. In addition to being paid the references prices, farmers need to also reach other parameters that are part of the living income equation, such as a sustainable yield.

To stay abreast of changes across all origins, Fairtrade periodically reviews the Minimum Price’s relevance in direct and open consultations with the farmers themselves through their producer organizations. The Fairtrade Standards Committee, which evaluates Minimum Price revisions, is comprised of three producer representatives, one trade union (worker) representative, three national Fairtrade organisation representatives, and one trader representative. Every Standard and Pricing decision goes before the Committee for approval. Members of the Committee will regularly push for changes or seek clarification to assure sound decision-making, and the strong voice of farmers in the Fairtrade system ensures pricing decisions are relevant to them.

To achieve the new Minimum Price, Fairtrade conducted a cost of production analysis as well as a three-month consultation process with key stakeholders. More than 540 participants – 86 percent of whom were farmers – from 40 countries provided critical inputs ultimately resulting in Fairtrade’s proposal to the Fairtrade Standards Committee and the decision to raise the Minimum Price.

“The future of coffee is one where fair pricing is the norm. It is not acceptable for coffee farmers to continue to subsidize the multi-billion dollar coffee industry, while also taking on the hard work of sustainable transition,” noted Monika Firl.

“Fairtrade coffee farmers are doing their part, and the new Fairtrade Minimum Price is an important step forward. But we know that farmers will continue to face increasing costs to comply with requirements related to deforestation and other priorities of governments, brands, and conscious coffee drinkers. In addition, reaching a living income for farmers will require collective action across the industry, and is not something that Fairtrade alone can achieve. It is time for the global coffee industry to step up and walk the talk.”