Fair-trade coffee producers often end up poorer

By Lawrence Solomon

Coffee is one of our guilty pleasures, and not only because of the calories that can be packed into a double latte. Many of us feel guilty that our pleasure is coming at the expense of the Third World coffee farmer, so much so that we gladly pay more for “fair-trade” coffee, which certifies that farmers receive more revenue for their crop.

Saturday, on World Fair Trade Day, we have something else to feel guilty about. That fair-trade cup of coffee we savour may not only fail to ease the lot of poor farmers, it may actually help to impoverish them, according to a study out recently from Germany’s University of Hohenheim. The study, which followed hundreds of Nicaraguan coffee farmers over a decade, concluded that farmers producing for the fair-trade market “are more often found below the absolute poverty line than conventional producers.

“Over a period of 10 years, our analysis shows that organic and organic-fair trade farmers have become poorer relative to conventional producers.”

These findings do not surprise me. I speak as someone who has had contact with various Third World producers in my capacity as president of Green Beanery, a company I founded seven years ago to raise funds for Energy Probe Research Foundation, a federal charity that I manage. Green Beanery sells more varieties of coffee, including fair trade and organic coffees, than any other company in Canada, giving me occasion to witness the nature of the fair-trade business, and hear first hand of its impact on small producers that supply us.

The fair-trade business is filled with contradictions.

For starters, it discriminates against the very poorest of the world’s coffee farmers, most of whom are African, by requiring them to pay high certification fees. These fees — one of the factors that the German study cites as contributing to the farmers’ impoverishment — are especially perverse, given that the majority of Third World farmers are not only too poor to pay the certification fees, they’re also too poor to pay for the fertilizers and the pesticides that would disqualify coffee as certified organic.

Their coffee is organic by default, but because the farmers can’t provide the fees that certification agencies demand to fly down and check on their operations, the farmers lose out on the premium prices that can be fetched by certified coffee.

To add to the perversity, it’s an open secret that the certification process is lax and almost impossible to police, making it little more than a high-priced honor system. Although the certification associations have done their best to tighten flaws in the system, farmers and middlemen who want to get around the system inevitably do, bagging unearned profits. Those who remain scrupulous and follow the onerous and costly regulations — another source of inefficiency the German study notes in its analysis — lose out.

The study, published in the journal Ecological Economics, recommends that policy “move from certification schemes to investments in the farm and business management skills of producers” — in other words, phase out the certification fees.

Most merchants of certified coffees are aware of these contradictions, but most won’t be aware of other problems in the certification business. For Third World farmers to qualify as fair-trade producers, and thus obtain higher prices for their coffee, farmers must join co-operatives. In some Third World societies, farmers readily accept the compromises of communal enterprise. In others, they balk. In patriarchal African societies, for example, the small coffee farm is the family business, its management a source of pride to the male head of the household. Joining a co-operative, and being told when and what and how to plant entails loss of dignity.

The contradictions are acknowledged even by many fair-trade merchants, who often refer instead to anecdotal reports of less quantifiable benefits such as better health care or schooling in a village or even, most tangentially, improved habitat for birds or wildlife.

The contradictions extend to consumers of coffee in the West. Several years ago, I received a call from a church in Kingston, inquiring whether Green Beanery could supply it with freshly roasted fair-trade coffee on a weekly basis.


Along the way, the church officer mentioned that the parishioners wanted to do what they could to help poor farmers in the Third World. I replied that I’d be happy to supply the church, but I also advised him that fair-trade coffee would not help the poorest of farmers — these small holders are actually hurt when Western consumers forsake them for coffee produced by better-off farmers who can afford the certification fees.

I also mentioned that various coffees produced by small farmers in some of the neediest parts of Africa would taste superb while costing the church less, allowing it to spend the difference on some other worthwhile cause.

After a long pause, the church official replied something like: “I still think the parishioners would feel better knowing that they were drinking fair-trade coffee.”

Some believe that certified coffee is superior in some way. It is not. The small-scale farms whose local ecologies produce distinctive, niche coffee beans can’t operate on a scale that would justify official certification. As the German study notes, “Certified coffees have distinct production and marketing systems with different associated costs than the conventional system.”

Neither is certified coffee different at all. In fact, at Green Beanery we have received bags of coffee, some labeled fair trade, some not, grown on the very same farm and identical in every respect. The fair-trade certified farmer himself can’t tell which beans will be sold as fair trade and which not — that decision is made by the higher-ups.

Because the fair-trade associations are intent on keeping the price of fair-trade coffee up, they limit the supply of coffee that can be labeled as certified. To the certified farmer’s chagrin, most of his fair-trade certified crop could end up being sold as uncertified conventional coffee.

And in this well-intentioned price-fixing game, the fair-trade farmer is the pawn and the joke is on the customer.

Author: Lawrence Solomon is founder of Green Beanery, which runs a roastery and coffee shop in Toronto as well as selling coffee online Green Beanery is not a member of the fair-trade associations described. LawrenceSolomon@nextcity.com

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Financial Post