Responding to widespread poverty in the global coffee sector, Fairtrade International is raising its minimum prices for certified arabica and robusta coffee.
The new Fairtrade minimum price for washed arabica coffee, which represents more than 80% of the Fairtrade coffee sold, is $1.80 per pound, an increase of 40 cents over the current price.
The Fairtrade price for natural robusta is increasing by 19 cents to $1.20 per pound. Additionally, the guaranteed premium for coffee sold as both Fairtrade and USDA Organic (FTO) is increasing from 30 cents to 40 cents per pound.
Since its inception in the de-regulated market era, the Fairtrade price has existed, in part, to ensure a baseline price for certified coffee even when the “C price” — or the commodity futures price — fluctuates downward.
“Despite the recent spikes in global coffee prices, coffee farmers are struggling with inflation, skyrocketing production costs, and crop loss due to the effects of climate change,” Senior Manager for Coffee at Fairtrade International said in an announcement from the international nonprofit today. “Coffee farmers are abandoning their farms in search of opportunities elsewhere and young people today in coffee-growing communities struggle to see a future in coffee. The fact that farmers cannot make a living in coffee is a tragic commentary for the industry and a huge risk for the future of the global coffee sector as a whole.”
The new Fairtrade prices are slated to come into effect for contracts on Aug. 1, 2023. Fairtrade last raised its prices in 2011, at a time when, like now, commodity coffee prices were relatively high. The previous increase moved washed arabica minimums from $1.25 to $1.40.
Coffee remains one of the largest products certified under the Fairtrade scheme, which also provides guaranteed premiums to producers that are assigned to community-level projects as determined by participating producers.
According to Fairtrade, there are nearly 900,000 coffee farmers in more than 650 producer organizations spanning 31 countries with Fairtrade certification. One of Fairtrade’s most challenging tasks, historically, has been to grow the demand for certified coffees so that they are sold as such, and the associated premiums can actually reach farming communities.
In today’s announcement, Fairtrade said that rapidly increasing costs of production and increasing pressures from climate change demand further action on global coffee prices.
“The future of coffee is one where fair pricing is the norm,” Firl stated. “It is not acceptable for coffee farmers to continue to subsidize the multi-billion dollar coffee industry, while also taking on the hard work of sustainable transition.”
As this breaking news is likely to bring dramatic reverberations to the green coffee market, DCN will be providing numerous follow-up reports.
Does your coffee business have news to share? Let DCN’s editors know here.
Nick Brown is the editor of Daily Coffee News by Roast Magazine.
Finally! Thank you Fair Trade International.
I find this an interesting point in the article. “In market terms, these prices are expressed as price “differentials” that are applied to futures contracts for green coffee purchases.” Who handles the differential and ensures the farmer is receiving the differential? My understanding is the farmer receives a fixed price on coffee. I want to see the actual traceability and transparency of farmers receiving the differential. From experience purchasing coffee, the FTO cup profile falls short compared to non-certified. Certified coffees focus resources on certifying FTO instead of resources to improve cup quality.
The coffee cooperative (or farmer) offers their coffee for sale at a chosen differential, (for example +121 FOB over the C price). Then, per rules of Fair Trade, the cooperative (or farmer) chooses when to fix their price based on the market level. To pass Fair Trade certification, there needs to be traceability and accountability for how the premiums are distributed.
As far as quality, per rules of Fair Trade, 25% of the premium needs to be spent on improving productivity or coffee quality.
Does this make the new FTO minimum $2.40/lb? ($1.80 minimum price + $0.20 Fairtrade Premium + $0.40 Organic differential)?