Since May 2010, international coffee prices have risen to 14-year high, sending waves throughout coffee supply chains from farmers to consumers, FLO reports. FLO now introduces important new measures to support coffee farmers and bring greater stability to Fairtrade coffee supply chains. Though high prices can be a boon for individual farmers who have coffee to sell, they can challenge producer organizations that signed contracts earlier in the year to qualify for pre-financing and then watched as prices rose to unexpected heights. In addition, coffee harvests have been lower than expected, competition for high quality coffee has increased, and a small number of producer organizations are having a difficult time fulfilling contracts. (Picture by Didier Gentilhomme: Santiago Paz has been harvesting coffee since the age of 15. Before him, his parents and grand parents also worked with coffee. The picture was taken in Provincia Zamora, Chinchipe, Cantón de Palanda, Ecuador)
“During the past decade of low prices for coffee, one of the effects was that coffee farms weren’t well cared for and many times they were abandoned, there was no investment or renovation. The principal effect we see today has been a reduction in productivity and in production of coffee volumes,” said Silvio Cerda, Executive Director of the Red Café, an organization representing the interests of small-scale coffee producers throughout Latin America. Given the current situation in coffee, FLO embarked on an expedited review of the Fairtrade coffee standards in January 2011 to quickly address current market conditions. The new Fairtrade Standard will increase investment in coffee-growing communities and introduces new tools for producer organizations and buyers to negotiate fairer, more secure trade deals. All decisions go into effect for contracts signed on or after 1 April 2011. Changes include:
An increase in the Fairtrade premium to USD 20 cents/lb from the current USD 10 cents/lb of which 5 cents will be earmarked for productivity and quality improvement efforts. Use of the premium is democratically decided upon by members of the producer organizations and is often used for social or business development efforts. An increase of the Fairtrade minimum price to USD 1.40/lb for washed Arabica coffee from the current USD 1.25; Arabica naturals will increase to USD 1.35/lb from USD 1.20. The new minimum price provides a stronger safety net for farmers if prices fall and helps producer organizations secure more pre-financing to purchase coffee from their members. An organic differential of USD 30 cents/lb from the current USD 20 cents/lb. The organic differential is in addition to the agreed price to account for higher costs of organic production. Revised trading standards were also developed to encourage fairer negotiations, clarify the role of price fixing, and reduce speculation.