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Saving Coffee by Spending More: 'Fair-trade' Certification for Specialty Beans Aims to Keep Growers on Their Land in the Developing World
 (Published: 02-Jul-03)

Chicago Tribune | By James P. DeWan | July 3, 2003

Back in the day, milk was milk, vegetables came in cans, and everybody got their chickens from a funny-looking guy named Frank we all knew from TV.

Nowadays, we prefer to eat chickens that have led fulfilled, free-roaming lives. We like our vegetables grown the old-fashioned way, free of pesticides and genetic engineering. We want milk from cows that have not been fed growth hormones.

And we want to see the labels that prove it.

Even coffee, once the beverage of the working Joe who became its namesake, increasingly finds itself with a label of certification. Unlike dairy products, vegetables and poultry, though, the certification of coffee has less to do with the quality of the product than it does with the condition of the producer.

Fair Trade Certified coffee, as its label proclaims, is the product of a 15-year campaign begun in the Netherlands by an organization called Max Haavelar. It began certifying products produced by Third World cooperatives that provided a decent standard of living for farmers while maintaining the environmental integrity of the land.

Today, fair-trade certification organizations exist in 17 countries in Europe, North America and Asia. The U.S. agency, TransFair USA, was founded in 1998. All certification organizations worldwide are part of an umbrella group based in Bonn, Germany, called Fairtrade Labelling Organizations International.

Although fair-trade coffee constitutes only 1 percent of the coffee market nationwide, its share of the specialty coffee market, where it is being directed, is 3 percent and climbing.

"To date, we've signed up over 200 companies, ranging from Starbucks to Thanksgiving Coffee and Dunkin' Donuts," said R. Haven Bourque, marketing and communications director for TransFair USA. "We estimate that fair-trade coffee is available in over 12,000 retail establishments nationwide."

According to Bourque, fair-trade certification requires that producers of coffee and purchasing companies adhere to five criteria:

- Democratic organizations: Individual coffee farms must be family owned and operated, and the farmers must belong to democratic cooperatives controlled by their members.

- Direct trade and long-term relationships: Purchasing companies must buy coffee directly from fair-trade-certified producers and agree to establish long, stable relationships.

- A fair price: Purchasing companies agree to pay the coffee cooperatives a fair price ($1.26 per pound or 5 cents above the prevailing market price for conventionally farmed coffee, and $1.41 per pound or 15 cents above the market price for certified organic coffee).

- Access to credit: Because coffee is only harvested once or twice a year, the purchasing companies must agree to provide pre-harvest credit or financing to the producers to allow farmers to survive until the crop comes in.

- Sustainable farming/environmental protection: Producers must implement environmental protection plans, with the ultimate goal of organically farming all fair-trade coffee.

But why would any self-respecting business owner pay $1.26 for a pound of coffee when it's only fetching 60 cents a pound on the commodities exchange? In this case, producers and retailers are betting that consumers of specialty coffee will view environmentally and socially conscious beans as a premium product.

And how did coffee growers get in this fix? Ted Lingle, executive director of the Specialty Coffee Association of America, believes it all boils down to the fact that U.S. agribusiness is so subsidized.

"Because coffee is not subsidized [in the developing world] the way American crops are," Lingle said, "an inordinate number of Third World farmers look to it as one of the few arenas in which they have a chance to compete in the world market."

This popularity of coffee among growers in developing countries has led to a worldwide glut, with the result that the market price is now lower than the cost of production. Thousands of family farms are going under.

The lack of work in the agricultural sector is a crisis that goes well beyond the per-pound price of coffee, Lingle said.

"People don't always make the connection," he said, "but the fact that illegal immigrants are clogging up our emergency rooms because it's the only way they can get health care, and the stories we hear about the workers suffocating in the back of trucks in Texas, it's all because at the end of the day these farmers don't make enough money and they have to abandon their farms."

With the wholesale failure of farms over widespread areas, another effect of the coffee glut could be the disappearance of regional varieties of coffee, known in the industry as "origins."

Kenneth Davids, consultant and editor of the online publication The Coffee Review, sees this possible extinction as disastrous. He believes the culprit is a vast underpricing of coffee in general.

"Kenya is one of the world's finest coffees," Davids said, "yet even at the current price of $12 to $20 dollars per pound, it costs less per ounce brewed than ordinary cola, and much less than wine or spirits of similar quality."

Davids believes that by raising the status and, consequently, the price of coffee, the differentiation between styles and origins can be rewarded.

"Most people have enough discretionary income to pay $2 more per pound," he said, "and if that happens, then everybody will be better off, because the farmers will be recognized and coffee lovers will have a much better product."

Product quality in a market-driven economy has always been of paramount importance, far more than any social or environmental concern attached to that product.

"A major benefit of the free market system is you don't have to know how things are produced, you just look at the price," says Grace Tsiang, senior lecturer in economics at the University of Chicago, "and my feeling is that it's very hard to get people to pay more for things that are physically identical."

Bourque agreed, and acknowledged that consumer education is a major focus of TransFair USA. "We're talking about a new economic model that speaks to empowering consumers," she said. "Every day you drink coffee, and with fair trade you're making a difference not only in the life of a farmer, but in the world economy in general."



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