Fairtrade built for the future
Fairtrade America Pilots
Global trade and agriculture are constantly evolving.
Fairtrade pilots are one of the ways we test new approaches to certification and standards to respond to new conditions, whether they are based on market changes, environmental pressures, legislation, or any number of other developments that affect the sale of Fairtrade ingredients and products. Fairtrade pilots start with idea, “what if something outside of the scope of our current standards could provide benefits to farmers?” These ideas are then reviewed, researched, tested, monitored, and evaluated- and can ultimately result in updates to our ways of working.
Frontier Co-op spice pilot
As a trusted Fairtrade partner, Frontier Co-op identified spice pricing as an area we could focus on to help move the Fairtrade market forward. While many commodities that are sold on Fairtrade terms have fixed Fairtrade Minimum Prices and Premiums, some of the spices that Frontier wanted to sell as Fairtrade did not. Instead of a fixed minimum, pricing was based on the commercial price that Guatemalan cardamom, turmeric, and allspice are sold for in conventional markets, and the additional Fairtrade Premium rate for these spices were 15% of that price. While receiving a Fairtrade Premium did create an environment where Fairtrade spice farmers would be compensated at higher rates than their conventional counterparts in the event of an extreme price drop, it posed several challenges.
Challenges in the spice industry
1. With the high degree of fluctuation in the commercial price for these spices, it is difficult for Fairtrade farmers to know how much they will earn in Premium payments. Because the Fairtrade Premium is often used by farmers to make production improvements and develop organizational capacity, this uncertainty can negatively impact the complex planning that goes into running a Fairtrade farming cooperative, and their ability to sell larger volumes of certified spices.
2. On the purchasing side, when companies are buying hundreds of thousands of pounds of Fairtrade spices, a fluctuation in Premium rate based on a change in the market price of as little as 1% could hugely affect the commercial viability of a product. Food sales are an industry with notoriously slim margins. If the uncertainty of a Fairtrade Premium tied to commercial price throws a company’s calculation of what they can pay while maintaining profitability into question, they may choose to forgo Fairtrade sourcing altogether.
In order to increase market access for Fairtrade smallholder farmers and ensure that they could continue to grow in a sustainable way, Fairtrade America worked with Frontier Co-op, two Guatemalan farmer cooperatives that produce cardamom, turmeric, and allspice, as well as Fairtrade’s local office that supports Latin American farmers (CLAC) and Fairtrade International to develop a pilot program for setting fixed Fairtrade Prices and Premiums for these commodities coming from Guatemala. As the process of implementing this pilot started, a second Guatemalan cooperative learned about the pilot and opted in to participating as a way to expand their business.
So, what's next?
Fairtrade America appreciates the support of Frontier Co-op, CLAC, Fairtrade International, and the involved farming co-ops in undertaking this project. We are hopeful that it will result in a fairer deal for farmers, increased interest in sourcing Fairtrade spices for businesses, and access to Fairtrade spices for consumers.