Why is Fairtrade necessary? Farming coffee without Fairtrade

Why is Fairtrade necessary? Farming coffee without Fairtrade

Feb 14, 2019

As the Fairtrade Foundation and all its local groups, including those here in Cumbria, gear up for Fairtrade Fortnight, fair trade expert Joe Human explains to us the value of Fairtrade. In this first of a series of two articles, he focuses on those making a living from coffee without Fairtrade. His next article will focus on how their livelihoods can be transformed through Fairtrade.

Over a period of 12 years, members of Keswick’s Fair Trade Campaign, together with Keswick Rotarians, have visited the coffee farming community of Choche in Ethiopia with which, since 2006, we have had a friendship link. Choche is located about 200 miles southwest of Addis Ababa, Ethiopia’s capital city, in Oromia Region. 

The coffee

Within Oromia lie all the country’s main coffee growing areas, Harar, Limu, Sidamo and Yirgacheffe, which give their names to some of the world’s most highly prized coffees.  Grown on rich, well-drained volcanic soils at altitudes above 1800m (6000ft), these coffees are all arabica.  Arabica coffees make up at least 60% of the world’s production.  The rest is comprised of the more bitter-tasting robusta, grown at lower altitudes in other countries.  

The coffee farmers

Choche coffee farmer, Iskire Aba Oli, harvesting ripe coffee cherries

The farmers of Choche, whose coffee is of the Limu type, live off tiny plots of average size around 1ha (2.4 acres), and in spite of the fact that their coffee is amongst the best in the world they are poor.  Their coffee bushes grow under shade trees and the cherries, each of which contains two little green beans, are picked once a year between October and December (see picture).  This means that what they make from their harvest must last them the year round, and be sufficient to buy most of their food, clothes and fuel; and pay for their transport, medicines and, at least in part, their children’s education.  In other words coffee is their life-line.  Without it they would starve.

Setting the price of coffee

Now you might think that the price they get for their coffee is determined in Ethiopia, but it is not: it is decided in USA on the New York Intercontinental Exchange (ICE).  ICE is a futures market where coffee contracts (not coffee itself) are bought and sold according to what traders think they can make, not now, but in a few months’ time.  Their aim is to buy as cheaply as possible and sell at a future date for a profit.  Like all ‘futures’, this market is highly volatile: prices can fluctuate wildly from day to day and month to month (see graph).  Any hint of impending oversupply will drive the price down; and any hint of a shortage will drive the price up. 

Graph showing the high volatility of arabica coffee prices on the NYICE, 1989–2016

Price crisis

In 2002/03 all of Choche’s coffee farmers, along with 25 million other coffee farmers around the world, faced a life-threatening crisis, when the global arabica price plunged to an all-time low.  Behind the crisis lay many factors, of which global oversupply was just one.  The effect was catastrophic: large numbers of farmers migrated for work; many sold their livestock and others the roofs of their houses; some axed their shade trees; indebtedness to money lenders spiralled; malnutrition increased; schools closed, and begging became widespread.

Big brands reap the benefits

While severe hardship decimated lives in Choche and elsewhere, big coffee companies, such as Kenco, Nestlé and Starbucks benefitted massively.  Continuing to sell their coffees to us at prices similar to those before the crisis, while buying their raw coffee at record low prices, it is reckoned that the extra income the coffee industry as a whole made from the crisis was in the order of $8billion.

Knowing what you now know as a result of reading this article, would you say that was fair?


Why is Fairtrade necessary? Farming coffee without Fairtrade