Tag Archives: Coops

Beyond Fair Trade premiums: Onam brings celebrations for farming families in Kerala

September brings the onset of Onam, the annual harvest festival, in Kerala, South India.IMG_2507

Small-holder farmers are celebrating this year. 4500 growers of cashew, coconut, coffee and spices amongst many crops, all very small scale (a couple of hectares), are collectively Fair Trade Alliance Kerala (FTAK). The alliance was formed in 2005, to address twin threats of farm debt and poverty both on the increase at that time and characterised in the extreme at times by the tragedy of farmer suicides.  Each year since then it gets stronger, a collaboration between farmers, promoters and consumers, defending the Kerala Development Model and using Fair Trade as a market tool to secure a strong sustainable business.

10666084_1489731467945805_4827038276676895373_nThe Onam celebration marks the annual distribution of price additional to the market. This year INR 11 million or $189,655 from cashew sales in to Fair Trade markets in Europe and USA.  Fairtrade premiums (certified by Fairtrade International) make up an additional INR 5 million.

This is the true inspiration. They are proud not just for the their own individual achievements as farming families managing the yearly risks but for that of the system as a whole and for all the cashew farmers of the region who have also indirectly benefitted from higher seasonal prices due to the associations strength and market share of the their supply chain. The security of a Fairtrade consumer market has added value to their crop and empowered many families.

Whilst you can read more about their Fairtrade story on the pages of the UK Fairtrade IMG_0296Foundation or on brands that sell their product such as Liberation CIC,  the wider farmer story is the one that goes on 365 days a year on their small homestead farms.

The glut of cashews collected at peak season gave power to processors who traded down prices well below cost of production as farmers became price takers. They had little choice and for some the stress was too much. Now with guaranteed contracts and pre-season finance flowing before harvest, FTAK and their supply chain partners can negotiate above market prices for the entire crop. Committed consumers are very happy to pay a small premium at retail to secure the deals.

Individual farmers in turn, trust the integrity of their Association and such is market share, local farm gate prices were estimated to be 30% higher at peak season. Now there are 40,000 small holder families farming cashews in the northern districts of Kerala producing between them around 30 million Kilograms of raw cashew nuts. The additional benefit the cashew farmers at large received because of the presence of FTAK intervening strategically in the market is about USD 0.30 per kg. This is an addition of nearly INR 450 million or USD 7.7 million in to the local economy this cashew season … just how much indirect benefit  is Fair Trade bringing!

Surely changing the paradigm like this is the true value and strength of Fair Trade when organisations leverage power beyond the personal bargaining of individuals to compete with businesses and bringing benefits to the many.IMG_2549

Empowerment has developed fast, their Fairtrade+3 policy is beginning to address the wider regional issues of biodiversity, gender equality and food security.  Also, having learnt that most value is accrued by businesses ahead of them in the chain, the farmers and their supporters now have confidence to launch their own brand into the BxT1NCyCMAAE_55Indian market, spearheaded by high quality organic coconut oil. What a fantastic example to farmers everywhere!

 

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Coffee Rust: La Roya threatens coffee farmers in Latin America

 

The Coffee Rust fungus is devastating coffee production across Latin America. In many areas such as Peru, production is down by 75%. Climate change is a major contributor has been widely reported (Video).

As most coffee is grown on tiny family acreages this crisis is increasing poverty amongst those with least resilience.

Yet again, it is interesting how opinions become polarised once Fair Trade is mentioned as part of any sustainability solution once dialogue starts on forums. This is a shame as there is much practical experience to learn from all sides. In my experience there are farmers affected by La Roya supplying a bit of their coffee Fairtrade (FT) certified via coops and many many more unable to sell as the market is too small. The dominant tradition is Free Trade, not Fairtrade, nor Direct trade, nor any other cheaper certification. For those lucky enough to have a FT contract it does not offer a solution to La Roya any more than a Free Trade one. Premiums are just too small as it takes seasons to address the issue. 

That debate about effectiveness is therefore about one’s business philosophy. Whether one’s business is small, entrepreneurial, unprepared to have third party scrutiny and unaccountable or large and needing a cost effective CSR programme to field company ‘ethicality’ to shareholders. Either way the issue is systemic. Farmers are rarely powerful intermediaries in the coffee trade, an ocean of sharks few understand and even fewer have the skills and resources to influence, which is only too willing to exploit weaker players. Fairtrade, for all its faults at least gives consumers some insight and some control on the outcomes however imperfect and is at last redressing the balance. Small-scale coffee farmers begin to have a voice.

Most coops are unable to sell anything like enough certified FT to provide enough reinvestment to combat the fungus. Equally, so-called ‘direct’ trade offers such small purchase volumes to specific farms and does not get coverage nor offer down side security. Consumers have no idea who to trust and who is making it up as they go. The real issue for farmers is the trade itself, pushing prices lower for competitive advantage, whether for certified or uncertified coffee. This can happen in any coffee transaction.

FT has no power to adjudicate or influence the transaction when it is above the COP. It would be most interesting for consumers to have transparency on the price /quality/volume equation. A real choice could then be made.

Fairtrade International (who set global standards) remains the only third party certification system that farmers actually have an equal stake in governance, strategy and standards development. As such it can be promoted as part of coffee farmer’s strategy to secure more of the value chain.

Free Trade is in general unable to provide an element of price security that a well-functioning coop can offer when prices fall as supply increases. Unlike Fairtrade, it cannot offer finance for coops to make critical early harvest purchases, which makes farmers price setters. Fairtrade on the other hand can also provide many examples of coop good practice and re-investment. But as a third party certifier, it does not control the transaction between buyer and seller, only certify and there are good and bad coops just as there are good and bad farmers. Most small scale farmers therefore use coops/certification as a price risk strategy, exploiting any upside by selling outside it and utilising it more when there is a perceived downside.

No doubt some excellent coffee is shipped from a few family farms via so called ‘Direct’ trade businesses. Whilst certified Fairtrade was created over 25 years ago by companies doing ‘Direct’ trade, there is now a new wave that does not buy into the values of those pioneers. ‘Direct’ has become a marketing term meaning ‘fairer than fair’ to position the new wave within the customer base created by Fairtrade. However, ‘Direct’ trade by definition has no middle men when really ‘walking the talk’. Few individuals are prepared to finance all the value-chain steps to sustain this at scale though, cherry-picking a few bags of fine coffee and leaving the farmer to market the lower grades. Fewer still are owned (like coops) by the coffee farmers and able to offer a range of services. By definition, they are small businesses which see any additional cost, especially that of independent third party scrutiny as a burden to competing.

The scale challenge remains and investment is needed to create climate resilience for small scale coffee farmers. Once the ‘Direct’ traders can sell thousands of tonnes of Fairtrade coffee, like British companies cafedirect and Twin Trading who also have farmers on their Boards, consumers, perhaps sipping a fabulous ‘Geisha’ coffee can make their ethical choice accordingly, knowing that perhaps, they are creating resilience to coffee rust too!