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Home  Articles The Green Café : Awareness Equals Opportunity at Fair Trade Co-ops
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The Green Café : Awareness Equals Opportunity at Fair Trade Co-ops |
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Thursday, 15 December 2005 |
by Karen Cerbreros, Elan Organic Coffees
It’s
winter 2005, and coffee is being harvested in the Guatemalan
highlands. Prices for containers of certified organic, fair-trade
beans have been fixed at $1.41 per pound since the previous fall
and for the past five years. Farmers have been grateful for that
price, which sustained them while the conventional market plunged
to a 100-year-low and their noncertified neighbors went broke.
Then the market shifts. Prices begin to creep up in
December 2004, but in January they go crazy. The C breaks $1 and
keeps climbing, reaching a season-high of $1.395 in March. Prices
in local markets meet or surpass what co-ops had contracted.
Farmers decide they’d rather get their money up front from
coyotes than wait three months for their co-ops to pay. The flow
of certified organic, fair-trade coffee slows to a trickle.
No one saw it coming. Not even the main importers were
prepared for the price increases, defaults and dramatic demands.
Conversations I had with producers went like this: “We are
three-quarters of the way through the harvest and have collected
only three out of 22 containers.”
“The coyotes are paying more at the farm gate for hard bean
conventional coffees than we are paying for organic, fair-trade,
strictly hard bean.”
“The multinationals are taking everything.”
“Our co-op members do not want to wait three months for payment.”
“We want 17 cents more a pound or we’re not shipping anything.”
 Bill
Harris, president of Cooperative Coffees in Georgia, buys from
farmer cooperatives. He was in San Marcos, Guatemala, when the
prices spiked. “It was heartbreaking to see that many of the
farmers could not convert quetzales (the Guatemalan
currency) to dollars,” he says. “They were not seeing that the
prices coyotes are offering at the farm gate were less than the
fair-trade price.”
As co-op after co-op broke its contracts with longtime
partners in North America, traders and roasters scrambled to
save what they could. TransFair USA, the licensed U.S. agent
for the Fairtrade Labeling Organization (FLO), tried to
encourage co-ops to meet their commitments.
Guatemala wasn’t the only country struggling. This scenario
repeated itself in Costa Rica, Mexico and Columbia. Now, defaults
are happening in South America.
We have seen fair trade work for producers when prices are low. This
winter, the model had its first test in a volatile, upward
market. We found areas that must be addressed if this model is to
continue to work.
Now, all the partners in the model have the opportunity to find solutions. Together. This is good.
Fair Trade Makes an Impact
Since the first fair-trade coffee was shipped to Holland’s Max
Havelaar in the late 1980’s, the movement has made people think about
the link between what we pay for our food and the welfare of the
people who produce it. As a result, demand for fair trade coffee
continues to soar in the United States. Many major conventional
coffee distributors now offer lines with FLO and other labeling
that indicates social responsibility.
For producers, fair trade’s strength lies in its
requirement that they form organizations and manage them
democratically, and in offering them a floor price when
conventional markets are low.
“Small, powerless people join together to pool their
resources. It’s an incredibly powerful tool for advancement,
when done well,” says Andrew Sargent, a California coffee
trader who studied coffee cooperatives in Honduras in 2003.
But this winter’s supply crisis showed that producer commitment hinges on price.
Co-ops Face a Crisis
Until this winter, co-ops had been paying much more than
local markets. Farmers delivered well above their minimum
commitments year after year. Co-op managers signed contracts
based on members’ actual deliveries for the past five
years. They grew complacent about member loyalty.
This year, when local markets offered more than the co-ops, farmers cut back their co-op deliveries.
A similar experience happened in Honduras in 2001, Sargent
says. He and others say co-ops everywhere can improve member
loyalty with:
> Better management
> Better education
> Better communication
> Plans for responding to market volatility
> Transparency regarding payments
Co-ops vary widely in the level of management skills among
their administrators and leaders. They need help with business
and financial management, quality control, cultivation
practices, building market relationships, income diversification,
risk management and how to serve their membership, Sargent
suggests.
Some groups that can help farmers improve basic business skills include
Germany’s green importer Neumann Kaffee Gruppe Gmbh. Neumann and
several European roasters formed International Coffee Partners to
help farmers improve both management and cultivation practices.
Education for co-op members also is crucial. In Honduras, the
co-ops that survived the 2001 crisis responded with a campaign to
teach “cooperativism” – the principles of the community
commitment that hold the co-op together. Co-op directors worked
hard to explain the co-ops’ mission, to show farmers the advantage of
co-op membership and the importance of fulfilling their
obligations. They also got strict about enforcing those
commitments by suspending or expelling members who didn’t
perform, Sargent says.
Co-ops have to back that up with services to members that
make membership worthwhile. Technical support, processing and
community development all need attention. And communication with
co-op members must be improved.
“The market was moving so fast that systems were not in
place to communicate on a daily basis with co-op members,” Harris
says. Farmers were taking their coffee elsewhere, while managers
with poor information took too long to make decisions.
Co-ops are responding in various ways. One co-op in Peru
bought three motorcycles so they could pass messages to remote
areas. Another bought a low-frequency radio transmitter
system, Harris says. Armed with better communications, they can
be more alert to changing prices and let members know how
they are responding.
With price such an important factor, co-op managers must be
completely open with members about costs for administration,
processing, shipping and community development.
What’s Next?
Despite its clear benefits, the fair-trade system has areas
that need improvement. To rebuild at origin, TransFair and FLO
are already taking steps to:
> Create electronic communications among producers regarding best practices.
> Hold risk-management workshops at origin.
> Make regular contact with producers throughout Latin America.
> Develop a producer training task force.
> Build producer capacity and infrastructure for quality control.
And we can go further. The model for socially sustainable
coffee has to continue to grow. It has to get bigger, better
and faster. To do that, TransFair and FLO also could think about:
> How to enforce contracts on the producer side.
> Offering transparency to buyers regarding producer payments.
> Opening FLO offices at origin as cash flow expands.
> Instituting guarantees for product integrity.
> Partnering with organic agencies to expedite inspections and training.
> Going to independent audits.
> Expanding the model to allow estates to join the program.
TransFair and FLO must make their producers understand that
fulfilling their contracts contributes to the larger goal of
building long-term relationships among producers, importers and
roasters. Co-operatives need to understand there will be consequences
for failing to fulfill contracts, such as being fined, being
placed on provisional certification and having
certification revoked.
Payments to farmers also may need to be re-evaluated. “We
need to make every step more transparent,” says Thomas Harding
Jr., a sustainability pioneer now heading Agrisystems
International in Pennsylvania. “If there’s no responsibility for
reporting or no transparency in the payments, how do you know the
money’s hitting its target?”
As fair-trade cash flow expands, every country could have a
FLO charged with teaching sustainable business practices
covering management, budgeting, building the organization,
educating members and quality control.
Combining organic and fair-trade inspections would provide
an open and verifiable audit trail, guaranteeing both that the
farmers are receiving what they should and that the fair trade
coffee is what is claims to be.
The time has come for FLO to transition estates into its
program to increase supply. Such estates could network with
smaller farms and co-ops in their area and become a resource
for building business and management expertise.
 Every Bean Counts
The good news is social responsibility is growing in a world of
corporate irresponsibility. Coffee is leading the charge. TransFair and
FLO are pioneers, but they are not alone. Businesses also can
think about strengthening their relationships with producers.
“The industry needs to not think in terms of ‘those cooperatives’
and lump everything together,” Harris says. “This year,
more than ever, speaks to the need for deepening relationships
with the cooperatives.”
One way is to work on business planning with co-op leaders.
“Cooperative Coffees has moved our annual meeting to Guatemala,”
Harris says. “We’re bringing in 17 roasters and eight
producer groups. We’ll be together for a week in
Quetzaltenango to build the plan for next year.”
 Integrity
is the root of sustainability, and many organizations are
shifting the way they do business. They are implementing their
own versions of social and environmental responsibility.
As awareness grows, each one of us will realize the
opportunities for making a difference in our own segment of the
coffee industry.
As Paul Dolan of Fetzer Vineyards states: “Sustainable
businesses must accomplish a transformation from mere
accountability- doing what’s expected- to broader
responsibility for maximizing profits in a way that heals the
earth and supports human rights.”
The possibilities are limitless. We are all interconnected. We can make every bean count.
Reprinted with permission of Fresh Cup Magazine |
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