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High prices prompt new Fairtrade standards for coffee

By Guy Montague-Jones , 24-Mar-2011
Last updated on 24-Mar-2011 at 14:48 GMT

Fairtrade International (FLO) has increased minimum prices and required price gaps for different Fairtrade coffees in reaction to the recent spike in prices.

Coffee commodity prices are edging towards highs that were last seen in 1977. FLO said this may be good news for individual farmers but some producer organisations have not benefited fairly.

It said some producers struggled to fulfill contracts because of poor harvests and others signed contracts early in the year and then watched prices rise to unexpected highs.

FLO has decided to amend its coffee standards to bring greater stability to Fairtrade coffee supply chains, ensure greater fairness in market gains and protect farmers when prices fall. The changes come into effect for contracts signed on or after 1 April this year.

One of the key problems that the new standards aim to address is the lack of investment in coffee farms caused by years of low prices.

Over the past decade many farms have been poorly cared for or even abandoned, according to Silvio Cerda, executive director of Red Café, an organisation representing small-scale coffee producers in Latin America.

The new FLO standards have therefore increased the Fairtrade premium and earmarked a portion of the increase to work on improving productivity and farm quality.

The full list of changes is given below:

  • An increase in the Fairtrade Premium to USD 20 cents/lb from the current USD 10 cents/lb of which 5 cents will be earmarked for productivity and quality improvement efforts.
  • An increase of the Fairtrade Minimum Price to USD 1.40/lb for washed Arabica coffee from the current USD 1.25; Arabica naturals will increase to USD 1.35/lb from USD 1.20. FLO said the new minimum price provides a stronger safety net for farmers if prices fall and helps producer organisations secure more pre-financing to purchase coffee from their members.
  • An organic differential of USD 30 cents/lb from the current USD 20 cents/lb. The organic differential is in addition to the agreed price to account for higher costs of organic production.
  • Revised trading standards were also developed to encourage fairer negotiations, clarify the role of price fixing and reduce speculation.

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