Fair Trade and the Food Movement

“Mass movements can rise and spread without a belief in God,” the social critic Eric Hoffer once wrote, “but never without belief in a devil.”

Few groups better embody this adage than “the Food Movement”- the amorphous but impassioned effort to bring responsibly produced food from farm to fork. The Movement, which has surely done more than any other reform effort in American history to provoke popular interest in sustainable agriculture, encompasses such a hodge-podge of sub-genres-localism, organic, “deep organic,” “artisanal” production, anti-GMO, foragers, farmers’ markets, free-range meats, slow food, etc.-that it couldn’t possibly be said to worship anything so unifying as a single God. But let there be no doubt about the devil, the diabolical force that gives wholeness to the parts and venom to the rhetoric. The devil lives. And it goes by the name of Big Agriculture.

Big Ag is a fat target, repeatedly pummeled, and much of the time deservedly so. In addition to heaping ladlefuls of invective upon the Cargills, Monsantos, and McDonalds that embody the inherent evils of agribusiness, the Food Movement has responded to the industrialization of food by developing niche alternatives intended not so much to reform Big Ag as to bypass it altogether.? Acolytes want to turn on the anger, drop out of the system, and tune in to a fundamentally different set of agrarian ethics. How these renegade goals will play out in the 21st century, despite the movement’s explosive start, is anyone’s guess.

The recent history of Fair Trade coffee offers a telling suggestion, although perhaps not an optimistic one, of what lies ahead for the Food Movement should it insist on trying to operate outside the bounds of conventional markets. The Fair Trade system, which imposes a price floor to protect growers if the market price of coffee falls below a certain level, promises to return to workers a higher wage, better working conditions, and incentives for more sustainable practices.? It’s hard to gainsay these values, ones that the Food Movement has, much to its credit, made central to its mission. Who, after all, doesn’t think agricultural workers deserve more social justice? Who doesn’t think the environment should be respected by the hardworking men and women (and children) who grow our food?

But the problem with Fair Trade coffee is that as the program scales up, the alternative market ethics it wants to sustain collapse.? Inevitably, the Fair Trade market becomes subject to the same laws that drive the conventional commodities market.? When the price of coffee drops, the appeal of Fair Trade’s price support lures growers into the cooperatives that sell coffee under the Fair Trade label. As poor growers rush into Fair Trade agreements, the supply of Fair Trade coffee rises. Protected by the price floor, the Fair Trade coffee remains inflated despite flagging demand. What Fair Trade importers thus end up doing with the excess Fair Trade coffee is dumping it-upwards of 75 percent of it!-on the conventional market.

And this is when the rhetoric and reality of Fair Trade really lock horns.? Excess supply dumped into the conventional market has at least two effects that run counter to the stated mission of the Fair Trade label. First, even though we’re not talking about a great deal of coffee, the dumped Fair Trade beans still add to the supply of conventional beans, thereby driving the price downward and, however unintentionally, hurting poor farmers growing for the conventional market.

Second, as the gulf between supply and demand grows, it becomes harder for cooperatives to enter into Fair Trade agreements. Whether through more expensive certification procedures or higher costs of inspection, the barriers of entry go up, leaving the Fair Trade market to an exclusive handful of producers. Gawain Kripke, Director of Policy and Research at Oxfam America, explained in an e-mail that “as long as fair trade only relates to a small fraction of trade and production of only a few select products, its impact will remain limited.” Kripke observed that Fair Trade markets are growing, and that they have benefitted many poor producers, but added that “they remain tiny in relation to overall trade.” What’s “desperately needed,” he added, was “a broader reform of trade and agricultural policy.”

I bring up the case of Fair Trade because the Food Movement-driven as it is by the Big Ag devil-is currently gathering steam around a similar idea: it wants to go “beyond the barcode.” Not unlike the Fair Trade system, the idea here is to find, as Michael Pollan recently put it in The New York Review of Books, “a new social and economic space removed from the influence of big corporations on the one side and government on the other.” My sense is that no matter how honed the Movement’s dedication to food and social justice may be, no matter how heady its animating slogans, the quest to go beyond the barcode-to find that “new social and economic space”-will find itself ensnared in the same economic and historical realities that have so severely compromised the initial promises of Fair Trade.

More to the point: the barcode, and the global system of commercial exchange it represents, cannot be dismissed, ignored or bypassed. It’s part and parcel of a deep history that our generation has (for better or worse) inherited and, as such, it must be confronted head on and reformed from within. Fair Trade reveals an unavoidable reality that will likely nag the Food Movement at every turn throughout the twenty-first century. The collective effort to drop out of the industrial food system and pioneer a fresh path might succeed when it stays small and can reliably depend on the sustained goodwill of consumers willing to seek reform through the fork, but it will likely backfire when it scales up. And sure, small might be beautiful, but small is also small, and goodwill — well, goodwill is a terribly fickle impulse.


thepirate captain

Your entire article rests on two criticisms of fair trade: 1) They end up dumping their coffee on the regular market anyway 2) there is a high start-up cost. I don't see a problem with 2), sometimes good things cost money. As for #1, is this a newspaper or an internet chain letter? Would it be too much to ask for a verifiable reference? Finally on this, just two factoids do not convince me that this system is "severely compromised" as you put it.

Now, I still don't see what this has to do with the wider food movement. Why can't I buy stuff at the local farmer's market AND buy organic at the supermarket, AND lobby my representatives to stop corn subsidies and unrestricted antibiotic use, i.e. contribute to reform from within and without? It sounds to me like you're promulgating a false choice here. Finally, about scaling: In the short term organic, and especially free-range, may have lower yields. But again you provide a false choice, all local perfect organic or all cargill. This is silly; a mix of organic, sustainable, and "urgent use only" or "minimal pesticides" would have a gigantic effect on soil degradation, pollution of waterways, reduction of ag energy/oil use, Gulf of mexico dead zone, etc. etc. etc., and probably only a very small loss of overall production. Finally, because of efficiencies, a tiny reduction in meat yields a huge increase in non-meat food; any loss of total food could easily be overcome by small reductions in beef production. Which would make us all healthier in the long run. -BTP

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Oz

I agree that the food movement has got a point on some issues of production, labour and, to a certain extent, healthy living, but there has also been the unfortunate side effect of demonizing certain foods and producers.

In Australia we have been growing modified crops for decades, the simple fact being that we are trying to farm in a country known for drought. The food isn't bad for you and the people who grow it aren't evil, however it is often perceived as being so by some people in the food movement. It has gone so far that nations suffering famine have turned away food aid because the product offered is GM. Government officials can afford such morals, but I am sure the starving populace could care less.

We should be able to have a real conversation on this issue without the politics.

Ike Solem

An example worth considering is the California wine industry - what wineries in California would get the "Fair Trade" stamp of approval under these rules? If California produces more wine than the local market will bear, then wineries would like to sell wine to people in Montana, China, Europe - and if it can be labeled Fair Trade, so much the better - but what are the requirements?

The highest quality wines are traceable back to the vineyards the grapes grew in, and the cheapest jug wines are just random lots of leftover grapes. In between, you have grape farmers and wineries and retailers all competing for the best price and trying to maximize their profit margins. Who should get the value-added Fair Trade label (worth, say, an extra $2 per bottle)?

So, let's apply fair trade rules. The jug wines would not get the fair trade label - they can't track their grapes back to anything other than an industrial agribusiness deal run by cheap immigrant labor. The wineries that get their grapes from select vineyards, however, would qualify - there's the local farmer, there's the local winery, there's the better-quality "Fair Trade" product.

The point here is that quality food can be sourced back to where it came from - it's not, say, the ground-up trimmings off 1000 beef carcasses from a giant slaughterhouse, it's the special kobe beef from the Wagyu cattle of Japan - you get a photo of the cow, and a life video - massage, getting drunk on beer - these are pampered cows. They get the Fair Trade label too.

None of this, however, changes the fact that a small winery operation, per gallon of wine, consumes the same amount of energy and resources as a large one. Organic farms need fertilizer and water, and it all has to be trucked in or piped in, in many cases.

Thus, the real ecological-economic challenge in modern farming, agribusiness-scale or local organic farm-scale, is to devise technologies that reduce or eliminate the need for fossil fuels in food production - while not putting huge burdens on the ecosystem. For example, integrating wind and solar into agricultural land could power electric farm machinery, provide cooling for food storage and/or processing, and transportation to markets. That would reduce fossil fuel demand to natural gas for use in fertilizer production, a key necessity.

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andrew

The complex system created by Big Ag can sustain expected faults like a drop in prices because that's what it's designed to do. However, I bet the agricultural-industrial-complex is extremely sensitive to unexpected shocks - like nobody buying their food anymore. I also bet that there is a tipping point - if the Food Movement gains critical mass, the agriculture industry might collapse faster than the housing market. While I'd be cheering louder than anyone about this, the collapse of Big Ag would likely affect the poor and uneducated the worst - just as it's these people who are the most vulnerable to Big Ag's horrifying production practices.

Howard

Maybe I'm missing something, but I can't make sense of the basic economics of McWilliams's story. Nowhere does he say that the total amount of coffee grown has increased-- people are just moving from one market to the other. So how does the price go down? Specifically, how does it go down below the price in a no-fair-trade world? It's sad that some people can't get into the club, but how is the club making them worse off?

As for the Food Movement, what is it exactly that we're supposed to be worried about? Too many people wanting organic food? Get the price signals right (including environmental costs) and let the market take care of it. The market, not economists, will decide what's scalable and what isn't.

Ann T. Hathaway

Food without trade is potatoes or millet day after day after day, with dried beans and whatever greens you can get your hands on. Fruits in season only and goiter in the midwest, beriberi and pellagra in the hills.

There have been horrible scams perpetrated by the food industry at every level. This free trade stuff is just the newest one. It's the moral equivalent of expensive minimalism. It looks like you don't have anything, and still you must have insurance.

As long as we only eat the choicest leaves or one part of the chicken, other people will have to make do with the less-choice leaves and the rest of the bird. This construct is morally false and actually reinforces the factory: steaks go here, and hocks go there. Arugula goes up and iceberg goes down.

I believe in neither wretched excess nor pompous austerity. And i am always offended particularly by the latter.
Ann T.

Spooner

I simply recoil from the phrase "fair trade". I do no economic analysis. Simple prejudice guides my actions. If I see it anywhere on a food label, I don't buy it. The very concept is morally repulsive to me. I'd almost rather eat hydrogenated oil.

Jeffrey

There are a number of straw man arguments being made here:

1) Fair Trade (a brand) = fair trade (an idea). Fair Trade is significantly flawed and price manipulative. Fair trade as an idea is that small farmers in poorer countries are routinely held hostage by middle men and not allowed to reap fair market prices. It's helpful not to demonize--or at least to note that you're selectively demonizing. This article lacks what those small farmers also lack: good information.

2) That there is such thing as "The Food Movement," and that it can be lumped together into one simple, overarching us-versus-big-ag position. Michael Pollan has may ideas, two of which are doubtfully objectionable for economists: 1) eat food (in the end, this is more important to him than whether or not it's modified or organic or whatever. He just wants us to eat food and not processed junk), and 2) get rid of ag subsidies. Subsidies support processing junk, and SURELY (!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!) this idea is welcome on an economics blog.

Plus, what is this article even about? It's just sort of blabbering with no facts or ideas at all. I have VERY little doubt that the self-selecting population that reads Freakonomics is capable of looking into such a popular topic themselves. Offering us nothing but opinions with no new information is really elementary nonsense.

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sam roger

RE: Fair trade coffee farmers - one of the things that often gets missed is that there are no fair trade coffee cooperatives/farmers selling 100% of their harvest on Fairtrade terms - the demand isnt there. But as someone has mentioned - fairtrade is about empowering the farmers - it helps give them power to not get ripped off by the local cayotes - having their own scales to get a correct weight of the coffee sacks is simple but makes a massive difference when you have someone trying to take advantage.
Also fairtrade has made strides in training farmers in cupping so they have their own sense of how good their coffee is.
someone else mentioned prices - the fact that coffee prices are set in NY & London & the price can be determined on paper deals - is that Fair? having prices set on supply & demand - how much stock Europe wants to hold or the move to just in time ordering - this is what the farmers have to deal with.
RE: the food movement in general - am a peak oil theorist fan - we need new local sourcing / ideas / ways of distribution. Our systems have been creating on the back of cheap oil & easy profits - we wont be able to carry on like this. At some point everyone will have to change the way they buy or think about food - better to start this process now & not get a shock later - but thats a personal choice - its surely all about education & making sure everyone has enough facts to make their own decisions. I remember life before the domination of supermarkets - I do hark back to the era of a long shop, chatting to shop keepers & friends in the street - felt quite boring as a child waiting for mother to stop chatting but would enyoy that now :)

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Noah Enelow

Mr. McWilliams, I am a PhD student in economics writing a dissertation on Fair Trade. A few comments.

First, where did you get that 75% figure? From what year? From which co-ops? From which products?

Second, who are the "Fair Trade importers" you are referring to? There are actually very few Fair Trade _importers_. There are a large number of Fair Trade registered _cooperatives_ based in developing countries and a large number of Fair Trade coffee _roasters_ based in industrialized countries. Most Fair Trade coffee is routed through conventional or gourmet importing companies in its journey from the first group to the second group.

Third of all, even if 75% of the coffee produced by the cooperatives is sold as conventional, it is almost always of a higher quality than the coffee sold by the growers who are not members of cooperatives. Hence it may be purchased at a higher price by roasters seeking to develop specialty blends. Much of this coffee may also be organic certified, which commands another premium besides whatever is offered for quality.

The coffee produced by cooperatives is higher quality because cooperatives offer a range of technical assistance services that private traders don't. These services are partly financed by Fair Trade premiums. They are also partly financed by international development agencies (USAID, DFID, GTZ etc.) that have long-term relationships with Fair Trade registered cooperatives.

Fourth, cooperatives have been shown to enhance farmer welfare in regions where the output market is dominated by a few large traders. This market structure is known generally as "imperfect competition," specifically as "monopsony" or "oligopsony." Monopsony means a market with a single buyer; oligopsony means a market with a few large buyers.

There is a well documented but little known result from agricultural economics that when a purchasing market is imperfectly competitive, as are coffee markets in most regions, the introduction of a cooperative exerts a pro-competitive effect on the entire market. This is because cooperatives are committed to maximize the income of their members, rather than maximizing profits. Hence, so long as costs of operation are relatively similar between cooperatives and private firms, cooperatives will offer farmers a higher purchase price - even without Fair Trade premiums. The private firms must thus compete with the cooperative for purchases from the farmers. In order to do so, they will tend to raise their purchase prices above what they otherwise would in the absence of a cooperative. When the farmers are poor - as they are in most agricultural exporting regions in the developing world - this effect makes a considerable difference.

To summarize briefly: cooperatives raise farm output prices when a few big traders dominate the output market. This is patently true of coffee markets in developing countries. This is true with or without a Fair Trade premium. In short, farmer cooperatives - if they are not mismanaged - are a powerful poverty alleviation tool.

To add to this result, World Bank economist Lorraine Ronchi recently found, in a comprehensive statistical analysis of Costa Rican coffee firms, that participation in Fair Trade improves the organizational efficiency of cooperatives. This result is independent of the degree of the cooperative's participation in Fair Trade. Simply fulfilling the criteria for transparent business administration, democratic governance and ecological sustainability bring the cooperatives up the learning curve.

Finally: to the commentator who finds any connection between "economics" and "social justice" inconceivable: have you ever heard of the field of development economics? Have you ever heard of Amartya Sen? Joseph Stiglitz, perhaps? Elinor Ostrom, maybe? Sound familiar? All Nobel Laureates in economics. All deeply committed to social justice.

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Ike Solem

You have to consider the situation in many developing countries when looking at 'fair trade', 'free trade', and 'slave trade' claims.

In the developing world, commodity buying houses are the norm - meaning that for a given region, there might be just one buyer, a big corporate exporter with close ties to the country's government. The small coffee farmer used to have no choice but to go to this buyer and take the set price - which was artificially low, since there was only one buyer.

The 'fair trade' model for coffee is actually predated by the efforts of small U.S. coffee company's (Peet's, for example) to develop personal relationships with coffee farmers to ensure a high-quality supply. The company invests in flying buyers all over the world, and hence consistently has access to the best beans. There's no middleman, no corporate export-import operation, so Peet's can pay premium prices to their farmers.

Now, if you expand this model to other types of commodity production and consumption in industrial and developing nations, it should have several positive benefits for both countries.

If goods are produced using the equivalent of slave labor, for example, some market theorists would dictate that since these goods cost less than goods made under a democratic system of government with guaranteed rights for citizens, then demand for these goods should rise, and the slave labor system should expand.

Likewise, if goods are produced with no concern for local pollution and ecological destruction, they may be cheaper for buyers in distant countries, so according to the same ideology, demand for these goods should also rise, displacing those producers in countries with regulations that result in higher production costs.

These trends - a 'race to the bottom' - have been encouraged by U.S. trade policy over the past few decades, however. The U.S. COULD give trading partners with sub-par rules on pollution and employment a penalty in trade deals, unless they raised their standards to U.S. levels. This would force our trading partners to improve their standards, and would lead to a 'race to the top' - a far better outcome.

The other option is to continue with children's toys produced in toxic sweatshops by underage indentured servants - the toys that end up laced with lead and dioxins and who knows what? Reality intrudes on economic theory in the form of toxicology...

The bottom line is that you should be able to trace the goods you are consuming back to the place they were produced, the food back to the field it was grown in. Then, you really know what it is you're getting. Fair trade, or free trade, whatever you prefer to call it, should ensure that this information is preserved.

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Erica

This article shows that economists need to start reading a little outside their discipline (things like systems theory). It is less important whether fair trade/food movement is assimilated back into the global market. What is material is that it has affected what we get to eat and how (the political economy of who owns the seeds). Indeed, Big Ag is already buying up the organic food companies, meaning that they cannot just keep on putting only industrial foods on our plates, and they don't get to monopolize the seeds through intellectual property. Yes, it's not exactly a separate space but hey it affects who gets to play, expanding the space of options for different players.

Ike Solem

By the way, the other side of the agricultural issue is this: the U.S. grows more grain than it consumes, and so has to export that grain to other countries.

Often, this involves dumping the grain at sub-market prices in countries like Mexico, which negatively impacts the small producers, who then cannot sell their crops for enough money to stay viable.

This is clearly unfair trade, but it's common practice. Is there a good way to end that practice, and also ensure decent prices for U.S. agribusiness (and they are the ones who grow the vast majority of the grain in the U.S.)?

Yes - convert the corn to ethanol, and blend it with gasoline or use it in pure form as automobile fuel. Now, however, you've upset the fossil fuel producers, who now have to share gasoline sales with farmers - but the small farmers in Mexico will do better, not having to compete with subsidizing dumped corn.

Would this be called "dumping ethanol on the conventional gasoline market" by the authors of this blog? I wonder...

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Coffee Importer X

"Also most of those people would be out of a job as coffee consumption tanked to a fraction of what it currently is because of skyrocketing prices (not to mention the rise of a large black market in "sweatshop coffee"). Artificial wage supports just privilege some subset of a population to the detriment of the rest of the population." ---- Josh

Well, currently the benchmark New York contract for SPOT delivery of Arabica Coffee is 7 per cent HIGHER than the FairTrade minimum price, and remarkably consumption continues to grow at the same pace it always has. Your theory may need some reworking.

"Economists" continually want to bash FairTrade for supposedly distorting the market. What they fail to acknowledge is that FairTrade is a market in and of itself. It is a basic principle of economics that the consumer will pay more for perceived value. There is demand in the marketplace for FairTrade coffee as a result of the minimum price floor it guarantees, not in spite of it. This is why equating FairTrade with subsidization and artificial wage supports is so false. FairTrade represents value-added in it's purest form.

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Coffee Buyer

"it helps give them power to not get ripped off by the local cayotes - having their own scales to get a correct weight of the coffee sacks is simple but makes a massive difference when you have someone trying to take advantage"

I've visited hundreds of coffee farms and it is quite rare to see a scale or a moisture meter on a small holders farm. Cooperative members deliver parchment (dried to roughly 12-14%) to buying stations operated by the cooperative. The coffee is weighed, analyzed for moisture level and defect count and sorted depending on intake quality. It is very possible that poorer quality coffee will be destine for the NYBOT C market, and producers will only receive the local price based on the C market. The exceptional coffees will be found by the QC department and offered at higher prices often outside of the FT market.

As I write this, the NYBOT C market is $1.64 per pound, up .35 in the past six weeks. There is a tremendous amount of pressure on fair trade cooperatives right now. They are likely hedging their contracts and working the market. If we see a radical downward shift in the market or another large jump it is entirely possible a poorly managed cooperative will get caught on a margin call and lose a fortune. This has happened many times. The second pressure is amongst producers who may see better prices selling cherry or parchment into the local market at this moment. If a co-op cannot deliver the contracts they have because of short supply, this presents another predicament.

Bottom line, Transfair USA has done a terrible disservice to the movement. They are the sole US certifier of roasters and importers and responsible for the marketing campaign that most of us have seen. In an effort to oversimplify the coffee trade, TFUSA has made it a black or white issue, much like their logo. The common belief amongst consumers is that fair trade "guarantees" a price to the producer. This is patently false, in fact it is often times impossible to trace the price paid to the producer. Roasters who seek transparency contracts are often rebuffed by the cooperatives.

Transfair has essentially become a marketing scheme. When it was founded in 1999 it served mission based roasters who were seeking an alternative to the mainstream. Ten years later, Starbucks is the leading Fair Trade roaster. Wal Mart and Nestle have taken the fair trade plunge, in essence the entities that created the need for an alternative market have co-opted the marketing terms and now use it as an extension of their product line to demonstrate the fact that they "care"

If you choose to live on the cutting edge, the coffees you might find most attractive will cost more money. Roasters like Stumptown, Counter Culture and Intelligentsia send their buyers out to remote farms, forge meaningful relationships with suppliers, develop microlots and pay very high premiums for quality. Often called "direct trade" this is a growing trend amongst roasters. However, you should be cautioned that there are many "monkey see, monkey do" roasters labeling their coffees "direct trade" after getting a picture snapped with a farmer then going home and buying coffee from their importer. Thus far, only Counter Culture has an independent third-party evaluation of their contracts.

The coffee trade is complex and nuanced. It cannot be distilled down to black or white. A consumer who is genuinely interested in traceability needs to forge a relationship with a trustworthy roaster, getting to know their buying ethics. This is hard to do in a grocery store bulk bin aisle and requires more effort than many people are willing to give. Bottom line, if you think the cheapest generic Fair Trade coffee in your supermarket is making a difference, you are probably wrong.

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Mantonat

The only way to ensure that coffee laborers are not mistreated is to not purchase coffee. Every penny you spend on coffee goes toward a company whose goal is to make money. If it is profitable to market the coffee as fair trade, they will do it.

If every coffee producer goes fair trade and the cost of producing coffee goes up all around, some genius will be the first to jump off the fair trade bandwagon and start selling cheap coffee. And people will buy it because it's cheaper. Morality only works in business if morality sells.

Travis

Since when is the food movement based on a different economic model. It's a different consumption model. Last I checked, the underlying idea is that you get what you pay for. One of the big arguments for smaller or mid sized farms to go organic is that they can make more money on what they do produce.

Unfortunately, until we, the taxpayers, stop funneling money into crops that no one wants via subsidies, the value proposition will be hard to convince people of.

Owen

Explain why more coffee is produced because of fair trade and how that actually affects non fair trade. And while you are at it, how about some research. But don't worry, I'm sure you can include all that in another formulaic blog post.

Jesse Raub

James, a really interesting article.

Another thing I'd like to bring to your attention is the move away from Fair Trade certified coffees towards Direct Trade standards.

Fair Trade is a global system of third-party certification that imposes standard in which coffee is grown. It guarantees a floor price, it monitors distribution of the price paid amongst the farm workers, and it ensures a commitment to some sustainable social and agricultural practices.

But here's the catch - in order to certify coffee Fair Trade, the farm has to pay a pretty substantial sum to have TransFair or another one of the certification organizations check out the farm and deem it certified. THEN, after the coffee is certified, the roaster who is roasting the green coffee has to pay to use the Fair Trade logo.

Ten years ago, when most micro-roasters and independent coffee companies were doing moderate business, Fair Trade was a great way to make sure your coffee was baseline ethically sourced, and a good way to market your coffee.

These days, the largest independent coffee companies (Stumptown, Counter Culture, and Intelligentsia, where I work as a barista), all use their own set of standards working directly with the farm, referred to as Direct Trade.

Now here's where it gets a little tricky - Direct Trade isn't a certification. There's no third party involved. So across the board, it's a little amorphous in it's definition. But what it comes down to is that these companies have individuals inspect the farms personally, generally have higher standards for social and agricultural practices, higher quality standards for the coffee, and a higher price paid than Fair Trade certification. A good number of the farms that these companies buy from are Fair Trade certified too - only these companies don't want to pay the money it costs to use Fair Trade branding, and instead most of that money goes into the higher price paid to the farmer per pound.

These three companies make up a majority of the non-corporate coffee market. A fairly substantial majority of it, actually, and countless other smaller companies are adopting the Direct Trade practices, too.

While Fair Trade is now being adopted by larger wholesalers and roasters, you're scant to find it on a bag of coffee from any of the leading coffee companies around the world.

The problem is that there is not much real transparency in the coffee market. Fair Trade standards have a floor price. Direct Trade has independently monitored ethical responsibilities to hold up their own standards, done in-house.

Counter Culture recently released their first annual Direct Trade report, which is a published document of the prices they paid for coffee, farm by farm, in an effort to promote transparency.

This is getting off track a bit, actually. What I'd like to know is an in depth study of how the push into Direct Trade by these companies has affected the demand for Fair Trade certified coffees.

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Campbell

The article can be summed up thusly:

It's wonderful that FairTrade wants to provide a higher wage for coffee growers. But they are not exempt from the laws of supply and demand. Price fixing creates gluts and shortages, and is unsustainable in a free-entry market. When the "real price" of coffee is lower than the FT price, FT gets a glut of coffee that they can't sell, and the only way to stop the system collapsing is to restrict entry. When the "real price" is higher than the FT price, FT gets a shortage and they can't sell enough without restricting exit from the program.

As always: You cannot break the market. Try, and the market breaks you.