Fair Trade News

4/28/2004 | The San Jose Mercury News
By John Boudreau


Bean Counters Perking Up

How do you like your coffee? Without guilt, say an increasing number of consumers, and an Oakland non-profit makes sure that's the way they get it.

TransFair USA has become the standard-bearer for the Fair Trade movement, which pushes for coffee growers to be paid a living wage. Any Fair Trade coffee sold in the United States must get certification and a seal of approval from TransFair.

The non-profit's job is growing. Fair Trade coffee imports have tripled in the past three years, although they still make up just a fraction of the $8.4 billion U.S. gourmet-coffee market. The retail value of Fair Trade coffee in the United States in 2003 came to $208 million.

"It is guilt-free coffee,'' said Paul Rice, founder and chief executive of TransFair USA. "But I would never call it that. I would call it feel-good coffee.''

The price of coffee in the New York commodity market is about 65 cents a pound. But farmers are typically paid anywhere from 15 to 45 cents a pound.

About 70 percent of coffee growers are small family farms on two to four acres of land. They often have no electricity -- and no computers. That means they have little or no access to information about coffee markets. Brokers show up at their gates and tell them what the price is, Rice said.
"They have virtually no negotiating power,'' he said.

Under the Fair Trade model, farmers bypass middleman brokers and get significantly more for their coffee by operating in cooperatives. Importers pay the cooperatives the Fair Trade price of $1.26 a pound, or $1.41 a pound if the coffee is certified organic.

TransFair is part of an 18-member international umbrella group, called Fairtrade Labelling Organizations International, that dispatches inspectors to these farm cooperatives around the globe. The specialists provide annual audits of each cooperative to make sure buyers are paying above-market prices to farmers. Buyers often will pay in advance for coffee so struggling farmers aren't forced to sell their beans early at cut-rate prices if they face financial hardships.

"If there was no Fair Trade price, the farmers would suffer,'' said Tadesse Meskela, general manager of a coffee farmers cooperative in Ethiopia. "Their children would not go to school. They would not even be able to feed their families.''

The non-profit (www.trans fairusa.org), which operates on an annual budget of about $3 million, is funded by foundations and certification fees of 10 cents per pound of Fair Trade coffee by commercial roasters. The agency now also provides Fair Trade certification for tea, cocoa and fruit.

In 2003, 18.5 million pounds of Fair Trade coffee beans were imported into the country. This year, TransFair expects 29 million pounds of Fair Trade coffee beans -- grown on small, family farms from Colombia to Ethiopia -- to be imported into the United States.

More widely available
Sip by sip, Fair Trade coffee is increasingly meeting the desires of java junkies across the country. Starbucks and Peets each offer a Fair Trade coffee. In fall 2003, Dunkin' Donuts introduced Fair Trade espresso drinks that will be sold in more than 4,500 stores nationwide. Procter & Gamble also launched a Fair Trade coffee, Mountain Moonlight.

And by year's end, Rice said, Wal-Mart and Target will start selling Fair Trade coffee.
"We are at the tipping point,'' he said.

Free-market advocates disagree. They don't believe the artificial prices set on Fair Trade coffee will dramatically reshape the industry and buying habits of most coffee drinkers.

"It is a feel-good program,'' said economist Bill Conerly, a senior fellow at the Dallas-based National Center for Policy Analysis. "I don't expect it to be a broad trend because people don't like to spend more money. I expect the impact will be trivial.''

The problem of poor farmers, he said, is really the market glut of coffee, the normal volatility of agricultural markets, as well as corrupt developing world governments where "cronyism'' is rewarded and onerous red tape often leads to bribes.

Fair Trade is, in a sense, a way to sidestep world market forces. But supporters of Fair Trade point out that the agricultural markets are anything but free. Vietnam's coffee industry was created with massive help from international organizations and government spending. In the United States, farmers enjoy billions of dollars in farm subsidies.

Also, Fair Trade coffee is more than a way to help impoverished growers, Rice said. It's a model that ensures high-quality coffee is available for the growing gourmet coffee market.

"Better payments leads us to make sure the coffee is a better quality,'' Meskela said. Farmers "care for the coffee because people care for us. They pay us a fair price.''

It is in the gourmet-coffee industry's best interest to support Fair Trade farmers in order to guarantee a supply of top-notch beans, said Mark Burton, co-owner of Connoisseur Coffee Co. in Redwood City. Indeed, Starbucks has voiced concerns about finding enough high-quality beans to fill its ever-growing cups of espresso and lattes.

"It does make sense,'' Burton said while operating a roaster cooking up 140 pounds of dark beans. About 10 percent of the beans Connoisseur Coffee roasts are Fair Trade.

Price to consumers
At the production level, it's the farmers who get squeezed, Burton said.

"And they are the ones who decide if we have coffee or not,'' he said. "The richest coffee comes from the poorest countries.''

The cost to consumers for Fair Trade coffee isn't that great, he added. Connoisseur's Fair Trade coffee is priced at about 50 cents more a pound.

The Rev. John Sullivan became hooked on Fair Trade coffee after his church, Hope Lutheran Church in Santa Clara, began serving it.

"The French roast decaf is the best decaf coffee I've ever had,'' he said of the Equal Exchange brand, which only sells Fair Trade coffee. "Even though I'm paying a few cents more, I think it's worth it. I feel good about it.''