What is fair trade coffee and why should it matter to you?

What is fair trade coffee and why should it matter to you?

When speaking of fair trade coffee, it is first important to define the term ‘fair trade.’ Fair trade means that there exists a fair and mutually beneficial partnership between a producer of a good and the buyer of a good – in this case, the coffee growers and the companies that sell the coffee (buyers). The fair trade regulation was brought about due to the recurrence of instances where especially poor farmers had full stocks of coffee that they needed to sell in order to sustain their livelihood and make room for new coffee, and had no choice but to make the sale at a loss due to the low price offered by the buyers.

Fair Trade not only guarantees the farmers a minimum price of $1.26 per pound regardless of supply or demand, it also provides them with long term relationships with buyers, as contracts of 1-10 years must be signed between farmer and buyer in all fair trade agreements. These contracts benefit the farmers not only by providing them with stability, but because the international nature of the business allows them to be eligible for credit through the home country of the buyer. The farmers need this access to credit because they are often at the mercy of unscrupulous money lenders during their lean season, and typically have great difficulty getting out from under these unfair loans.

There are, however, some arguments against fair trade coffee. In a theoretical sense, some believe that the institution of a set price and contracts may hurt the overall quality of the product, as farmers will see little incentive to innovate and improve standards of quality.  Fair Trade proponents counter with the notion that the stability of fair trade brings more money for the farmers to increase the quality of their product and inspires a more holistic and even keeled ground for competition. Another argument against fair trade coffee is the fact that it ignores the rules of supply and demand. Whereas demand inspired pricing may see less stability in price, it could also result in greater profit spikes for the farmers. The argument against this stance is that demand based pricing is a risk not worth taking. Despite these arguments, even those who argue against some of the finer points of fair trade can still agree that in most cases the farmers are much better off than they were prior to the fair trade standard.

Regardless of the conflicting viewpoints, consumers should feel confident that coffee marked as fair trade was purchased in a way that was beneficial to the farmer and the coffee industry on the whole, and that in purchasing it they are doing their part to sustain a small coffee farm that may otherwise not be able to continue operation.