17 Feb 2023
What’s the future of coffee? A living income for farmers.
Our new Living Income Reference Price for coffee from Honduras is Fairtrade’s most recent contribution toward a global coffee trade where farmers earn decent livelihoods and businesses are more sustainable.
Any conversation about the future of the world’s most popular drink has to start with a basic premise: coffee farmers must be able to earn a living income.
This means a household can afford decent housing, nutritious food, education, health care and other essentials.
In Honduras, coffee farmers have worked hard to get by for generations. In recent years, however, challenges have multiplied. Years of stagnant global market prices reached a 12-year low in 2019, with farmers being paid less than 90 cents per pound. The onset of a global pandemic affected communities, and hurricanes Eta and Iota in 2020 caused further damage to land and crops. Farmers continue to reckon with the continued effects of climate change; for instance, droughts and crop failure were a driving force behind a wave of migration out of Honduras in 2018, and “la roya” – coffee leaf rust disease – continues to threaten harvests.
It’s only right that the people whose work is at the foundation of a $200 billion industry can afford a decent standard of living. And in fact, economic and environmental sustainability go hand in hand. Without the proper soil, water and weather conditions, farmers can’t grow coffee. And without a living income, they face a downward spiral, not able make the investments they need to adapt to climate change or adopt farming practices that support healthier crops and diverse ecosystems. But when farmers earn enough, they can invest in their farms, grow more efficiently, diversify income streams, and build a sustainable future for themselves.
This is why Fairtrade has introduced Living Income References Prices as part of our strategy to identify and advocate for the necessary conditions for farmers to reach living incomes.
A Living Income Reference Price is what farmers need to be paid to be able to invest in sustainable farming practices and achieve a living income when other key parameters such as viable farm size and sustainable yields are met. Currently these prices are voluntary, and are paid by companies seeking to increase sustainability commitments within their Fairtrade supply chains.
Honduras: the newest origin with a Fairtrade Living Income Reference Price
Working closely with farmers and other national coffee experts in 2022, we developed the first Living Income Reference Price for organic Arabica coffee from Honduras. It is the fourth such Fairtrade price since 2021, joining other important coffee origins of Colombia, Indonesia and Uganda.
The Living Income Reference Price for Honduras has been set at 94 Lempira (equivalent to US$3.89) per kilo of dried parchment at farmgate.
This price is within the range of what Honduras coffee farmers have been selling their coffee at over the past harvest season: according to Fairtrade’s baseline analysis, with data from approximately 300 farmers from eight cooperatives, farmgate prices ranged from 80 to 110 Lempira per kilo in 2021/2022.
However, these prices were exceptionally high, and farmers are not able to count on the volatile coffee futures market when they make decisions about investing in farm improvements.
For each reference price, data collected by Fairtrade is reviewed with a country-based technical roundtable in order to check feasibility and align with any other national initiatives in the coffee sector. In Honduras the technical roundtable was comprised of national coffee experts representing producers, industry, NGOs and research institutions. A two-day in-person workshop was held in September 2022 to analyse the baseline results, pool local knowledge and expertise and agree on the values for each of the variables in the price model.
During these stakeholder consultations, it became clear that farmers aren’t feeling as much benefit from the higher coffee prices, since the costs for farm inputs as well as for everyday items and transport have also increased tremendously and continue to go up.
While the reference price is voluntary, the Fairtrade Minimum Price and Premium remain mandatory for all Fairtrade coffee sales and provide a safety net that helped many farmers stay afloat in recent years. (Read the story of one woman who returned to Honduras from the U.S. with a dream of becoming a coffee farmer.)
Putting the pieces together for a living income now, and for the next generation
In addition to developing reference prices grounded in real data, Fairtrade also works with companies and cooperatives to develop projects that tackle other aspects necessary for a living income in addition to price, such as optimizing yields and diversifying income sources. For instance, Lidl Germany has launched two new women-grown Fairtrade coffees under its “Way to Go” brand, which include payment of the reference price along with programmes such as support for sustainable farming practices and leadership development.
At the upcoming Let’s Talk Coffee conference in Honduras, hosted by Sustainable Harvest, industry stakeholders including farmers, traders, roasters and brands, will come together to talk about the next generation of coffee. Fairtrade’s Carla Veldhuyzen van Zanten will be there, talking with producers and their buyer, Bellwether Coffee, on a panel about the importance of sustainable prices and the need to keep living incomes squarely in focus.
“There is still a lot to be learned about how all components work together and how all the right pieces can be put in place,” said Veldhuyzen van Zanten, “but it all starts with listening to farmers. For the farmers of today and tomorrow one thing is blatantly clear: a stable, high-enough price is a precondition for improving their livelihoods in a sustainable manner. It is no longer up for debate that the coffee industry has to enable farmers to earn a living income. We have set this new reference price for coffee from Honduras to guide the industry and jointly work toward a hopeful future for farmers.”