News from Fair Trade: FLO’s Pricing Announcement, Market Forces & Peru

 Last Week, the Fairtrade Labelling Organizations International (FLO) announced a long-awaited decision to increase the Fair Trade certified minimum price for washed and unwashed arabica coffees. The press release is here: FLO Price Increase Release

For washed arabicas the minimum price per pound bumped to $1.25 per pound (up from $1.20) and for unwashed the price increased to $1.20 USD per pound (from $1.15). The FLO increase translates into a base price of $1.55 for organic fair trade washed arabica coffees. ($1.25 minimum + $.20 organic premium + $.10 fair trade premium).

FLO’s press release states that market pressures didn’t warrant a price increase for robusta coffees.

This announcement follows on a decision made in June 2007 when FLO conceded a modest increase on both the organic and fair trade premiums by 5 USD cents each under  pressure from producers, ATOs (alternative trade organizations) and allies. 

For many ATO’s and trade allies, FLO’s decision to increase pricing is too little too late. For several years now, alternative traders and small scale producers have attempted to engage FLO on the minimum price issue. How are Fair Trade cooperatives supposed to secure coffee in a market when, on one hand, the global commodity market prices are reaching those of the Fair Trade minimum and, on the other end of the spectrum, elitist coffee importers are offering exhorbitant prices to indiviual farming families for a year’s entire harvest?

So, while FLO’s price increase may be vital when the world’s coffee prices spiral downwards once again, it is unlikely that small scale farmers will see much benefit in 2008 from the recently announced price increase.  In 2007, importers of specialty coffee were forced to pay prices that far exceed fair trade minimums in order to secure high-quality coffee. 2008 promises to be yet another year of increasing prices in the specialty market.  The Oromia co-op from Ethiopia, for example, recently announced they expect approximately $2.50 per pound USD on 2008 contracts.  

The increase in coffee prices, whether dictated by FLO or a result of demand for specialty coffee, is a victory for small scale producers. Alternative traders and allies have long advocated for severing ties with the commodity markets and, instead, create pricing structures based on the cost of production plus differentials related to quality, cost of living, isolation of the farmers and inflation in the country. It remains to be seen what our market in the States will bear as increasing prices get passed along to roasters, retailers and consumers. The value of currency will be another factor to watch in 2008 because buyers from Europe, New Zealand and other countries, with their currencies becoming stronger and stronger against the dollar, have more flexibity to deal with increasing prices in their respective markets.

 Finally, it’s important to note that healthy trading relationships shouldn’t be relegated to pricing alone. Small scale coffee growers from Peru circulated the following letter (linked below), admonishing FLO for their acceptance of Perales Huancaruna into the FLO certification program. They assert that Perales Huancaruna, the biggest coffee exporting corporation in Peru,  has a long history of disenfranchising small scale growers in order to make a profit.  They fear the entrance of Perales Huancaruna into FLO’s system will be the demise of the fair trade certification system for small scale growers in Peru. Read the letter by clicking below

Letter from the National Association for Small Scale Producers in Peru

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3 Responses to News from Fair Trade: FLO’s Pricing Announcement, Market Forces & Peru

  1. David K says:

    wow, $1.25 a pound, that’s so generous. What do they sell fair trade coffee for again? $10.00 a pound? And so they’re giving farmers another nickel? don’t spend it all in one place, pedro.

  2. timjo62 says:

    Thanks for breaking down and contextualizing the FLO action. It’s pretty clear that the fair trade model needs some adjustments.

    http://uhfairtrade.org/

  3. AL-Hamdani
    For Green Yemen(Mocha)Coffee Exporters&Gen.Agencies
    http://www.coffee-yemen.com

    Dear Sirs,

    We have the pleasure to introduce ourselves as the major company for Yemen
    (Mokha Green Coffee) producer and exporter in Yemen. We have distributing branches in the Arab Gulf countries.
    Yemeni product of (Mokha Green Coffee) is known all over the world
    We are keen to deal with you as agents in your country for our product mentioned above.

    By virtue of its comparable distinct super quality, flavor and taste,
    Yemeni coffee you will certainly find ready sale all the time and the consumers
    demand for the Yemeni Mocka coffee will be increasingly considerable in
    markets due to its best quality which is not found elsewhere in the world.

    You will therefore find us ready to grant you very promising competitive
    prices to confirm our interest in establishing business with your esteemed firm for mutual benefit.

    Your rapid reply is expected with thanks

    Best Regards
    Ahmed Ali Al-Hamdani
    General Manager
    Al-Hamdani For Producing & Exporting Yemen Green (Mocha)Coffee
    Zubairy St., – Asir – P. O. Box: 25373
    Sana’a – Rep of Yemen
    Tel 009671200441
    009671214463
    Fax 009671201957
    http://www.coffee-yemen.com

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