Fair Trade News

FOCUS: Sugar Industry Embraces US Fair Trade Movement

October 22, 2007 | Dow Jones News Wire

NEW ORLEANS (Dow Jones)--Sugar is the latest product to join the U.S. fair trade movement--which pays growers a decent wage--as the global cane industry tries to emerge from a long history of labor and environmental abuses.

Fair trade is an economic model helping producers in developing nations reach self-sufficiency by giving them financial opportunities and training to compete in the global market. U.S. sugar sales under the movement are small but growing and totaled 4,545 metric tons in first half 2007 against 3,139 tons in 2006.

"By including sugar almost three years ago, the U.S. fair trade movement has been building on its success with coffee," said Pauline McKee, marketing director at Wholesome Sweeteners in Sugar Land, Texas--the top fair trade sugar importer in the U.S. "We're seeing cane growers linking with co-ops, getting adequate returns and having access to credit." Consumers, she said, should know that producers are decently paid and the environment isn't being harmed. In recent years, coffee drinkers have willingly spent more for fair-trade java.

McKee said sugar production has a dubious history in the U.S. and elsewhere. Now and then, a new headline flares about cane cutters being worked to exhaustion. In December, CNN showed Haitian cutters in camps in the Dominican Republic working for a pittance--sometimes under armed guards. In top producer Brazil, officials are monitoring cane companies for worker abuse.

As for the environment, consumers--particularly in Europe--are bothered by sugarcane and cane ethanol from deforested Amazon fields in Brazil, industry members said.

The U.S. now imports more than 16% of its sugar needs--mainly from developing nations, where laws can be lax or poorly enforced when it comes to pay, injuries, child labor and hazardous pesticides.

Anthony Marek, spokesman for California-based TransFair USA--the sole U.S. third-party certifier for fair trade products--said the movement "gives farmers a better income, allowing them to hold onto their land, invest in the next harvest and keep kids in school. Prices are agreed on and middlemen are eliminated."

Fair-trade certified, or FTC, sugar was launched in the U.S. in March 2005 as European demand for the product surged, and TransFair USA began certifying retail sugar then. The U.S. consumes FTC sugar grown by co-ops in Costa Rica, Kenya, Malawi, Paraguay and Philippines.

   How Fair Trade Sugar Works
    
FTC producers are paid a minimum price per ton of sugar, plus a fair trade premium and, if relevant, an organic premium. Premiums are wired to a coop's account each quarter and invested in equipment, wells, clinics and schools. To become a licensed importer, a company signs an agreement with TransFair USA. Sugar is purchased from licensed cooperatives and companies registered by Fairtrade Labeling Organizations International, known as FLO. A company buying from cooperatives pays the fair trade minimum--an international FOB price set by FLO as follows: $480 a metric ton for raw cane sugar, $520 a ton for white cane sugar and $650 a ton for whole raw cane sugar.

For organic sugar, an additional $120 a ton is added. If the ICE Futures U.S. world raw price in New York rises above those minimums, the Fair Trade minimum increases under a formula.

Marek said when ICE world raw sugar was 9.56 cents a pound, or $210.76 a ton, recently, it was less than half the FTC floor price of $480 a ton.

Fair trade producers in Paraguay and Malawi don't own sugar mills, but their sugar can be purchased from private mills registered by FLO. Prices are negotiated between the importer and mill, but the importer has to pay a "social premium" of $60 a ton directly to the grower cooperative.

Companies selling FTC sugar also pay a 35-cent per pound fee to TransFair on FTC sugar purchases, and submit quarterly reports to TransFair detailing purchases, prices paid, shipping dates and contracts.

   Co-ops Embrace Fair Trade
    
Cate Baril, business development director at TransFair USA, said sugar is moving through fair-trade product development in the U.S. faster than certified coffee, cocoa, tea, rice, vanilla and herbs did. The initial response from sugar co-ops "was so sudden and so positive that we are already seeing a second generation of cooperatives applying to enter the system," she said.

Big companions won't feel comfortable buying FTC sugar, however, until the number of participating co-ops grows, Baril also said. No fair trade sugar has entered the U.S. yet from Brazil--where sugar is mainly grown on a large scale, not by small cooperatives. One Brazilian group has applied to the Fair Trade Labeling Organization however, and is waiting to be inspected.

Wholesome Sweeteners works with co-ops in Costa Rica, Paraguay, Malawi, Mauritius and Argentina. Wholesome buys from the mills and afterwards sends a premium to grower coops for what it purchased. With proceeds sent to a co-op in Canera del Sur, Paraguay, that group invested in trucks, its first tractor, road and bridge repairs, a radio station and environmental education, McKee said.

In the two years since FTC sugar launched, Wholesome has sent more than $500,000 to fair-trade co-op partners in Costa Rica, Malawi and Paraguay.

   Conscientious Consumers Seek Fair Trade Products
    
Educated consumers, religious groups and college students care about fair trade, industry members said. FTC sugar is about twice as expensive as regular sugar, but McKee says she often forks over $4 for a cup of coffee "and in comparison, I don't think paying $2.50 for a one pound bag of fair trade sugar is unreasonable."

Because of concerned consumers, sales at Wholesome Sweeteners--which are mainly to food companies that need organic ingredients--ballooned from $1 million in 2001 to $55 million or more in the current fiscal year. Sales are still a fraction of the $10 billon U.S. sugar market however. Billington's in the U.K. bought Wholesome from Imperial Sugar Co. (IPSU) seven years ago, and Imperial remains a minority shareholder. Wholesome sells organic, natural, white, light and dark brown, regional, and even vegan or no-animal use sugar, along with molasses.

Fair-trade certified sugar is slowly becoming an option for U.S. consumers.

FTC sugar is sold at Whole Foods Market (WFMI) and Sam's Club, and FTC coffee vendors-- Green Mountain Coffee (GMCR) and Equal Exchange--offer FTC sugar packets, Baril said. Roman Meal Co., the Washington-state bread maker, sells hot cereals made with FTC sugar. Michigan companies Peterson Farms Inc. and Food for Thought use FTC sugar in dried fruits and preserves. Ready-to-drink tea and coffee makers plan to use FTC sugar, and body care companies are considering it for exfoliants and masks.

Ninety percent of fair trade sugar in the U.S. is also certified organic and enters through the government's specialty tariff-rate quota, with the other 10% coming in under the regular tariff-rate quota.

-By Susan Buchanan, Dow Jones Newswires; 504-371-5461; susan.buchanan@dowjones.com