by Scott Patterson, Peace Coffee Director

I recently attended the 17th annual Specialty Coffee Association of America Conference held in Seattle. Having attended three prior SCAA exhibitions I was prepared for the mind-numbing array of products and accessories; how many different artificially flavored syrups do we really need -- especially when you can get Peace Coffee, right? At the same time, the growth of specialty coffee and independent cafes has created a unique space for the explosive growth of Fair Trade coffee in this country. Rather than wander the aisles hunting for the next hot product, Peace Coffee attends these extravaganzas to connect with many of the farmers that we work with who set up booths in the Fair Trade “zone” of the convention center. I arrived in Seattle with a new goal this year; to better understand some of the challenges facing Fair Trade that have been unearthed by changes in the conventional coffee market.

As Cooperative Coffees’ Bill Harris highlighted in our previous newsletter, price increases in the New York “C” market that began last November have been good for individual farmers but a challenge for some cooperatives. In the medium to long-term history tells us that the “C” price again fall below costs of production. Without strong cooperatives Fair Trade will be less effective in delivering on its mission of paying a livable wage.

When Fair Trade is working it requires serious coordination among the parties involved, on the part of individual farmers and their cooperative organizations along with the roasters and importers who buy Fair Trade coffee.

In simple terms, an individual farmer who is a coop member “turns in” their coffee to the larger cooperative. The cooperative pools the members’ coffee, sells it under Fair Trade contracts and gets a better price for the farmer while also fostering long-term, stable relationships and investing in their communities with Fair Trade premiums. In essence, the cooperative as an organization has to compete or buy coffee from its members. These members may have several choices. They can turn their coffee into the cooperative; sell it to a “coyote” on the local market or simply hold onto the coffee hopping for a better price later or decide it is not worth selling. During the past five years with historically low conventional prices; Fair Trade was the best if not only option. It is still the best option. But the rapid, upward price change in the conventional market at the end of 2004 caught everyone by surprise (yes, even our Magic 8 Ball at Peace Coffee didn’t catch this) leaving some cooperative managers without the tools to compete in the local market.

In Seattle, meetings with representatives from several of the cooperatives we work with in Central America, confirmed their difficulties in “competing” with the coyotes. The price move came at a particularly bad time for coop managers, at the start of the harvest. The core issues came down to communication and execution.

Imagine you are a member of a coffee cooperative. You live a good six-hour hike from your coop’s office. You hear lots of talk of high prices and local speculators start coming around making offers that they haven’t made for years. There is a real buzz. For the first time in a long time you have some decent choices. You can turn your coffee into the coop, get a pre-payment (advance credit) and wait until the end of the harvest to determine your final coffee income (after the coop closes it’s books for the season). You may or may not have the ability to convert a Fair Trade contract, - price per pound into your local currency and compare it to the price per quintal of coffee cherries that the coyote is offering (trust me, this isn’t easy). So, with the limited information at hand you do what any smart businessperson would do, sell some of your coffee for cash on the barrel and deliver some to the coop. No one can blame you! But with more complete information from your cooperative and better execution on the part of the Fair Trade buyer (Peace Coffee and Cooperative Coffees) in delivering enough advance credit at the right time you would be empowered to make an even better decision; deliver all of your coffee to the coop.

We know Fair Trade works when the conventional market is low. It also beats the conventional market when that market is up, providing a premium. The challenge is to make Fair Trade work better when the conventional market price moves rapidly up or down through the range of the Fair Trade minimum or floor price, $1.41 per pound.

Peace Coffee and the other members of Cooperative Coffees have made this a goal and we are holding our annual coop meeting in Guatemala this August. Farmer representatives from several of the coops with whom we work will be in attendance and we look forward to their input on how we can work together to improve communication at the farmer/cooperative level. We also want to identify their needs in terms of being better able to compete during the very rare times when the local market is competitive with Fair Trade.

Fair Trade’s core concept is empowering farmers to negotiate a fair price for their work. In Seattle, one coop manager stated how he is a “price taker”, meaning he takes the price that he is offered despite the amazing quality of the coffee that this coop’s farmers grow. I am sure this is not an isolated sentiment. We clearly have a lot of work to do for farmers to become price negotiators! I left Seattle with a renewed sense of purpose to keep improving our execution of Fair Trade on the ground.

In the next newsletter, I’ll share how the price changes have impacted our business and the domestic market. Down the road we’ll be following-up on our annual meeting in Guatemala. Thank you for reading and enjoying Peace Coffee!

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