No Pain, No Gain?

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Equal Exchange Yobo Member
March 9th, 2011

Credit: Flickr/WikiMedia

By Nicholas Reid, Equal Exchange Sales Account Representative

Due to a multitude of factors, most beyond our control, coffee prices are going up. Again. Starting April 1, 2011, Equal Exchange is increasing the cost of all coffees sold to retail stores by $.50 a pound. Please trust that this has been a very difficult decision on our part; and that we are doing everything we can to offer you the highest quality coffee at the best prices possible.

Why Are Prices Going Up?

At the heart of the matter is decreasing supply, increasing demand and commodity speculation. On the supply side, climate change is wreaking havoc on weather patterns across the world (we’ve had quite an interesting winter ourselves). Coffee plants rely on periods of rain followed by sunny dry spells in order to flower, produce cherries and ripen. Without these regular “seasons”, harvests around the globe are down. At the same time, demand for specialty coffee continues to rise, not only in the traditional consuming countries like the United States, but increasingly in producer countries as well.

The situation is further complicated by speculation in the commodity market. Traders are buying up supply and coffee contracts, assuming that prices will continue to increase. This becomes a self-fulfilling prophesy, as less supply and contracts are available. Like many other commodities (oil, sugar, cacao, for example), coffee is at a 14-year high.

Why is Fair Trade more important than ever?

It’s true that coffee farmers are benefiting from higher prices. While we spend much of our time- likely too much- talking about the benefits of higher prices, much of the success and value of the Fair Trade movement is in the “infrastructure” we have built: primarily farmer co-operatives. These organizations serve to protect the farmers when prices are down; and grant farmers direct access to markets when they would otherwise be forced to rely on brokers and middlemen who have historically exploited farmers’ isolation and lack of access to markets.

When the commodity market is high, small farmers can be tempted to sell to middlemen for immediate cash, rather than wait to receive a higher price through their co-op at a later date. The cumulative effect of many individual farmers making this decision is that coffee starts to “leak” outside the co-operative fair trade system. Farmer co-operatives lose members and supply, and have a hard time meeting their obligations to partners like Equal Exchange. In the past, middlemen have offered artificially high prices to farmers in order to “break” the co-ops (like busting a union) leaving the farmers in a much weaker position in the future- a “divide and conquer” approach.

What are we doing about it?

We see our role, in this tumultuous period, to do everything we can to support producer co-ops and maintain the cooperative supply chains that are the heart of Fair Trade and real economic change for small-scale farmers. We are scrambling to get co-ops and farmers the best prices we can; so they can compete with local coyotes today and continue to develop and expand sustainable coffee production in the long-term.

In order to do this, Equal Exchange is taking every opportunity to be more frugal and efficient and cut back our own expenses. We are asking retailers and consumers to share some of these costs as well. Through this price increase, we can continue investing in the movement we have all built together, reinforcing the structures of empowerment and change, and continue to offer you the highest-quality coffee available.

Story originated at Small Farmers Big Change