We are often asked how much farmers receive from the retail price of a product sold on Fairtrade terms compared to the same product sold on conventional terms. While this type of comparison may appear to be a simple way to demonstrate the impact of Fairtrade from the consumer’s perspective, it doesn’t actually address the real inequities in typical conventional market arrangements.
For producers, the value of Fairtrade is not about the relationship of their selling price to that of the finished product, but to their costs of production and the conventional market price. There are also many complex and variable factors to take into account in comparing different elements of the final price paid by consumers which can be misleading. For example, the price received by a cocoa or coffee producer selling to the conventional market depends on many factors including:
- - fluctuating international market prices - the producer ‘cut’ from a chocolate bar will vary according to the international price of cocoa at the time of sale and the percentage cocoa content of the bar
- - whether the producer is an independent smallholder or a plantation worker
- - whether the smallholder/co-operative/plantation carries out processing or other value-added operations
- - whether a smallholder sells directly to a local buyer or is a member of a co-operative
- - whether the co-operative sells to local traders or to auction, or exports the product on behalf of its members
- local trading conditions – these can vary greatly within a country let alone within different continents e.g. whether the industry has been liberalized or is state-regulated
- - the varying costs of production from country to country.
Once the primary product is sold to a certified Fairtrade importer, the costs are similar to those for a conventional product – transport and export costs, shipping and insurance, import licenses and taxes, ripening or processing, packing, warehousing and distribution, marketing and promotion, and retailer overheads.
Fairtrade Canada has no control or influence over commercial costs or margins. And because the major costs of the finished product are incurred after the producer has sold the commodity, the return to the producer will inevitably make up a relatively small percentage of the retail price.