Just as we are dependent on coffee to get through a hard day’s work, it is also the most valuable and widely traded tropical agricultural product. Around 125 million people worldwide depend on coffee for their livelihoods, however, many of the 25 million small holder farmers who produce 80% of the world’s coffee fail to earn a reliable living.
Coffee is well known for being a boom and bust commodity. Global coffee production varies from year to year according to weather conditions, disease and other factors, resulting in a coffee market that is inherently unstable and characterized by wide fluctuations in price. This price volatility has significant consequences for those who depend on coffee for their livelihood, making it difficult for growers to predict their income for the coming season and budget for their household and farming needs.
The coffee supply chain is complex as beans pass through the hands of growers, traders, processors, exporters, roaster, retailers and finally the consumer. Most farmers have little idea of where their coffee goes or what price it ends up selling for. The more lucrative export of green coffee – beans that have been processed ready for export and roasting – is only an option for farmers if they can form cooperatives, purchase processing equipment and organize export or hire a contractor to carry out these services.
Fairtrade was started in response to the dire struggles of Mexican coffee farmers following the collapse of world coffee prices in the late 1980s. With Fairtrade, certified coffee producer organisations are guaranteed to receive at least the Fairtrade Minimum Price for their coffee, which aims to cover their costs of production and act as a safety net when market prices fall below a sustainable level. Through their producer organisations, farmers also receive the additional Fairtrade Premium to invest in business or community improvements and must use at least 25% of it to enhance productivity and quality, for example by investing in processing facilities. In 2013-14, Fairtrade coffee farmer organizations received over $70 million in Fairtrade Premium. They invested around half in improving the infrastructure, facilities and processes in their organizations.