Drip, drip, Drop: Tumbling coffee price puts farmers in peril

25 September 2018   |   Kyle Freund, Media Manager, Fairtrade America

The global price for coffee hit a 12-year low recently jeopardizing the livelihoods of the 17.7 million small-scale farmers who produce over 80 percent of the world’s coffee. The volatility of international coffee prices leaves many wondering what the future holds for farmers and the industry. Learn more and find out how you can help.

Imagine if you relied on a single payday per year – all of your work distilled into one paycheck. Now imagine that estimates of your salary could vary by 100 percent? How would you plan for the future? How would you support your family?

This is the reality faced by coffee farmers in more than 50 countries around the world.

Given the growth in consumption and production of sustainable coffee, it was generally assumed that low prices in coffee were a thing of the past. Coffee farmers were doing the hard work investing what little they had in what the market wanted – higher quality, productivity and responsible production – now they were supposed to reap the rewards.

That is by no means the case.

Costs of production for coffee have been steadily increasing with inflation, labor costs, and agricultural inputs eating into margins. Climate change and unpredictable weather patterns are reducing the amount of land suitable for quality coffee. Young people are fleeing the farm with little interest in following in their parents’ footsteps. Simultaneously, prices have been in decline since 2016, with the current price of less than $1 dollar as a tragic low (for more on this, check out this article on Daily Coffee News).

While brands and coffee drinkers clamor around the topic of sustainability, it seems strange that the prices paid to the millions of coffee growers can drop to prices that are well below the costs of production.

Sustainability at what cost?

With this historic low, we will see where the coffee industry stands. Is coffee about the quick profit or keeping an eye on the long-term? Investing in productivity and quality, which has been in favor as a win-win for farmers and buyers, ultimately yields better results for traders and roasters than the average farmer.

Truly sustainable coffee will not come cheap. Coffee farmers need a price that more than covers the costs of production, a price that helps provide for a dignified livelihood.

As the only certification that requires buyers to pay a minimum price, Fairtrade recognizes the need to dignify people’s work with a fairer price. Though the Fairtrade Minimum Price provides stability to coffee farmers during volatile market situations, it is not meant to be a long-term support. That’s why Fairtrade also requires companies to pay a separate Fairtrade Premium of $0.20 per pound that farmers’ organizations invest in community and business projects or even bonuses for farmer members.

Fairtrade International sets the Fairtrade Minimum Price and Premium in close consultation with farmers, cooperatives, traders and roasters to find a price that aims to cover the costs of sustainable production without limiting market access. Even with this, research shows that the Fairtrade Minimum Price is not enough. The danger lies in setting a minimum price too high that would stop companies from participating in Fairtrade.

The current Fairtrade Minimum Price of $1.40 per pound was last adjusted 7 years ago when coffee was trading at close to $3 per pound. But the harsh reality today is that the market price has been below the Fairtrade Minimum Price for over a year.

According to Fairtrade International’s latest monitoring and impact report, the average certified coffee producer sells just 34% of their production as Fairtrade, even though 100% of all they produce could be sold as certified coffee.

What this tells us is that farmers have done their homework producing coffee more sustainably and working hard to comply with rigorous international standards, but there’s a lot more of room for buyers to pick up the slack.

In a situation like this, only one thing is clear: doing nothing is not an option. Either you are trading fairly or you’re contributing to the slow destruction of the coffee industry.

What you can do:


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