by Bill Harris, Cooperative Coffees

Recently returned from two months in Guatemala, Bill Harris (founder of Cooperative Coffees, a green coffee importing cooperative of which Peace Coffee is a member) offers a sobering summary of the time he spent in Guatemala, addressing critical issues central to the Fair Trade of coffee and its ability to benefit producers now and into the future.

Have you ever stumbled through a work experience that shattered many of your past assumptions and left you asking yourself the fundamental questions -- What are we doing? Why are we doing it? Is this working? I’ve just returned from two months in Guatemala unexpectedly burdened by these basic questions. My plan was simple - escape the office in Americus for a few months in order to relax and reflect on our coffee work, visit with producer cooperatives in Guatemala and Mexico, and take another stab at the language that continues to elude me. Well, some folks on Wall Street tossed me and the coffee cooperatives a huge curve ball.

For the last 5 years, the New York “C” market price for green coffee has fluctuated between .45 and .80 cents per pound. This translated into horrible prices for farmers and an acute need for alternative trade strategies that offered farmers a decent price. The consumer market for fair trade expanded rapidly as many organizations promoted fair trade as a solution to the coffee price crisis. Last November, the NY “C” began to edge up, crossing 1.00/lb in December and hovering around 1.05 when I left for Guatemala in early February. By the end of February the NY “C” price had reached 1.20/lb and in March it peaked at 1.40/lb. Last Friday, the price had fallen back to 1.20/lb.

"Why does this matter?" you might ask? If you know a bit about Fair Frade coffee prices, you know that any Fair Trade contract for green coffee should adjust with this market and always pay the farmer a substantial premium over the market. Well, this is where my education began. I think that I learned more about Fair Trade during these 8 weeks than I have during 8 years of fair trading. First, rising prices are good -- very good -- for the farmers who have suffered through years of terrible prices. Many cooperatives, however, do not have systems and tools in place to deal with price volatility. Coffee is typically sold by the cooperative long before the harvest – and I was surprised to learn that many of these sales are made at fixed prices, rather than fluctuating market-based pricing as is found in a true fair trade contract. The result: the cooperative that has paid farmers 2-3 times the local price over the last 5 years now finds itself in the awkward position of having sold the farmer’s coffee at low prices in September and October of last year. Meanwhile, throughout February and March farmers were being enticed to sell their coffee to local traders at prices they haven’t seen since 1998. To make matters worse, it has been so long since the cooperatives needed to “compete” with these local traders that some of them have lost the knowledge and communication systems needed to react on a daily basis to these market changes.

Many varied opinions are floating around the coffee industry concerning how to deal with this situation. We know that, due to the rapid price rise, quite a few farmers sold their coffee to the “coyote” rather than delivering it to the cooperative. We know that the cooperatives will therefore not deliver many of their contracts this year. We know that this rapid rise and the recent fall in prices is due to speculation on Wall Street -- and that it has serious, long-term implications for the farmers and the cooperatives with whom we have partnered. We are also convinced that fair trade systems are quite relevant in today’s market, but some in the industry will attack the system based on their experience this year.

At Cooperative Coffees, we consider this challenging year a reminder that we must strengthen our relationships with the farmers and their cooperatives whenever possible. Fair Trade must evolve and we must have a long term approach as we confront the inequities of current trade systems and fine tune our alternative models. The coffee market is cyclical and we must protect and strengthen fair trade models and the farmer cooperatives in order to prepare for the inevitable price downturn that always follows a speculative price bubble. So, I didn’t have a relaxing, reflective experience that I had anticipated...But I couldn’t have visited during a more important time and am quite thankful to have been with many cooperatives during this period. And I didn’t get to work on my Spanish as much as I had hoped so I need to get back down to Guatemala as soon as the market calms down!

More on this topic to follow from Peace Coffee's director Scott Patterson upon his return from the Specialty Coffee Association of America Conference.

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