Awareness Equals Opportunity at Fair Trade Co-ops
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
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,
“The multinationals are taking everything.”
“Our co-op members do not want to wait three months for
“We want 17 cents more a pound or we’re not shipping
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
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
Fairtrade Labeling Organization (FLO), tried to encourage
co-ops to meet
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,
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
“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
deliveries for the past five years. They grew complacent about
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
> 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
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
Education for co-op members also is crucial. In Honduras,
the co-ops that survived the 2001 crisis responded with a
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
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
Another bought a low-frequency radio transmitter system,
Harris says. Armed with better communications, they can be
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,
shipping and community development.
Despite its clear benefits, the fair-trade system has areas
that need improvement. To rebuild at origin, TransFair and
already taking steps to:
> Create electronic communications among producers regarding best
> 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
> 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
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
management, budgeting, building the organization, educating
and quality control.
Combining organic and fair-trade inspections would provide
an open and verifiable audit trail, guaranteeing both that
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
farms and co-ops in their area and become a resource for
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
“The industry needs to not think in terms of ‘those
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
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