We at Equal Exchange appreciate Ted Ketcham\’s status report on Fair Trade coffee in the Winter 10/11 edition of GreenMoney Journal.
Fair Trade in general, and Fair Trade coffee in particular, has been an important and encouraging victory in the Corporate Social Responsibility (CSR) sector, though not without its ups and downs or its controversies. As a player deep within the Fair Trade movement Equal Exchange believes that socially responsible investors, consumers and business leaders can learn much from the still unfolding story of Fair Trade coffee.
And as there are key story lines that the status report did not cover we\’d like to offer the following “addendum” to Ted\’s article. We\’ve also a few comments on a few minor points.
The biggest story right now is that the hundreds of co-operatives of small-scale coffee farmers around the world that are the backbone and raison d’etre of the Fair Trade coffee movement have been facing a serious, yet counter-intuitive challenge to their very existence – very high coffee prices. And it’s a threat that sheds light on a common problem plaguing CSR in the Global South – insufficient financing for small and medium-sized enterprises.
You see, the market price for coffee has been steadily high for over three years and in the last quarter it has climbed to levels not seen in over 30 years. Normally you’d think high crop prices would be an unalloyed good for the farmers, but the problem is that it can be killer for the co-ops owned by those same farmers, and that exist only to serve the farmers.
When the commodity market is sky-high the co-ops need much more cash upfront so that they can pay the farmers for their crop upon delivery. But for a variety of reasons co-ops typically are poorly served by the banking or financial sector and lack access to affordable credit. Without credit the co-ops are easily outbid during harvest season by the conventional coffee buyers and exporters, the same buyers who screw the farmers during the low markets, but who are better connected and have access to plenty of credit. In such a situation the co-ops cannot buy enough coffee to fulfill their export contracts and their farmer members, willingly or not, turn again to the “coyotes” who always seem to have enough cash. Hence the co-ops lose badly needed business AND they’re unable to properly serve their co-op members AND their reputation with buyers suffers AND they miss out on the (rare) flush times, while for their conventional competitors this dynamic works in reverse and entirely in their favor. It’s even possible that some co-ops will fold because of this “high market/no cash” crisis. That, of course, would be disastrous for the farmers, but very welcomed by the coyotes, once prices come back down – which they always do.
This is one of the moments when socially responsible investing directly intersects with Fair Trade coffee. To help address this problem Equal Exchange created a program 15 years ago so that every year, in high or low markets, we can nearly always provide our farmer co-op partners with access to affordable credit in advance of the harvest. To do this we work with exemplary financial firms like Root Capital (www.RootCapital.org) and Shared Interest UK (www.shared-interest.com) neither we nor these partners are anywhere near large enough to facilitate enough financing for all the farmer co-ops who need it, but it helps. In the meantime we encourage investors to consider this overlooked piece of the Fair Trade puzzle.
Another large development has been the entrance of a new Fair Trade certifier – Institute for Marketecology, aka IMO, who a number of Fair Trade enterprises, including Dr.Bronner\’s, Guayaki, Interuppcion, Rapunzel and ourselves now use for some or all of our products. If you include domestically grown crops there are now at least three Fair Trade certifiers operating in the US. For consumers and retailers this mean that some certified Fair Trade products no longer bear the black and white Fair Trade seal licensed by TransFair USA. Which leads to another story.
Starting in 1998 the first Fair Trade certifier for the US market – and for long time the only – was TransFair USA. Recently TransFair has sought to rebrand themselves as “Fair Trade USA”. However a number of Fair Trade enterprises and advocates (including Dr. Bronner\’s, Equal Exchange and others) are opposing this effort on the grounds that the proposed name is too sweeping, maybe even presumptuous, and implies that the organization _is_ Fair Trade in the United States, instead of being one of many organizations active in this field.
Lastly, we thought that including Peet’s in a Fair Trade update was, well, unfair. For years Peet’s was known in the industry for their opposition to Fair Trade and has, as noted, never offered more than one, we think token, Fair Trade coffee. Further, the Utz certification they utilize is recognized as requiring lower social standards, and typically delivers farmers lower prices, than do Fair Trade sales. A more deserving candidate would have been one of the many 100 percent Fair Trade, 100 percent organic roasters, like Café Campesino in Georgia, or even Green Mountain Coffee Roasters, the only large roaster to have converted 30 percent or more of their imports to Fair Trade.
Respectfully, Rodney North, An Equal Exchange worker-owner
http://www.equalexchange.coop
