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How Fair Trade Coffee Fits into the Global Supply Chain

August 1, 2017

Our commitment to only roast Fair Trade coffee is challenging because it really limits what we can buy on the world market. The latest report conducted by Fair Trade USA in 2015 shows that only 9% of the world coffee market is certified Fair Trade.

 

Defining Fair Trade

 

Fair Trade practices can apply to cocoa, fruits, honey, herbs, nuts, seafood, sugar, tea and wine. When it comes to coffee, our partners at Fair Trade USA define it as a voluntary program that guarantees farmers a minimum price for their crop and links farmers directly with importers to create long-term sustainability. This enables the coffee growers to earn higher incomes because it reduces their vulnerability to middlemen who offer cash for their coffee at a fraction of its value. Globally, around 78% of Fair Trade certified coffee comes from Nicaragua, Peru, Mexico, Guatemala and Colombia.

 

Coffee Coyotes

 

Historically, there have been very large discrepancies between what a coffee farmer makes off of their crop and what we sell it for in the developed world.

 

A major problem facing coffee growers is what to do with their crop once it is harvested. Much like any commodity, every time coffee exchanges hands, the price of the beans increases.  A common way for coffee growers to unload their crop is to sell it to middlemen, known in South American countries as “coyotes.” You often find these middlemen in the early stages of a supply chain, but they can appear anywhere along the chain.

 

Why would any farmer sell their beans to a coyote? Sometimes coyotes may have the only car in the surrounding area, and the farmers can’t move their crop without transportation.  The coyotes will also extend credit to the farmers to purchase new seeds, charging very high interest rates. This can give the coyote a tremendous amount of power and influence over the local farmers.

 

Growing Role of Co-ops in Coffee-Growing Countries

 

In many coffee-growing countries, cooperatives have been organized in recent years to help farmers put their coffee on the world’s stage. At a very high level, cooperatives connect coffee farmers directly with distributors and wholesalers, eliminating many of the middlemen in the supply chain.  Typically co-ops elect their own local representatives to the governing board, provide low-interest financing to small farmers, stabilize coffee pricing, build out local infrastructure to bring coffee to the international market, redistribute capital into farmer education, and provide medical benefits to their community.

 

However, as with any human endeavor, problems can and do arise around co-op governance. One major problem has been the low percentage of women who participate and have memberships in cooperatives. A study published by Colorado State University and the Ford Foundation in 2002 found that in El Salvador, male heads of households make up more than 90% of co-op membership. While that ratio has certainly improved over the past 15 years, the imbalance continues to this day.

 

Another study published in the International Association of Agricultural Economists chronicles the difficulties that Kenyan cooperatives faced once the federal government pulled back oversight of the institutions. Under the Cooperatives Act of 1998, the Kenyan government enacted agricultural reforms that freed the coffee sector from government oversight.  

 

Cooperatives gained complete autonomy to elect their own officials, make policy decisions and sign financial transactions with businesses outside Kenya. While initially well intentioned, the lack of credible governmental oversight led to violence at co-op election meetings, and some elected co-op officials were caught embezzling funds. Since the early 2000’s, cooperatives in Kenya have become more transparent and the Fair Trade movement has helped lead the way. 

 

We buy Fair Trade coffee for your enjoyment

 

Any time there is change in an industry, some people will try to take advantage of it. However, when all is said and done, the Fair Trade movement has helped bring transparency to the world’s coffee markets and put more money in the pockets of many, many thousands of small coffee farmers.

 

While we do not have direct relationships with farmers at this point in our company’s history, we are able to get coffee directly from Fair Trade organic cooperatives around the world. For example, we get our Ethiopian coffee from the Oromia Coffee Farmers’ Cooperative Union (OCFCU), which partners with more than 332,393 farms, accounting for sixty-five percent of Ethiopia’s total coffee production.  Our goal is to eventually buy beans from the farmers directly; however, it will take time to develop those relationships.

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