Fair Prices for Farmers: Simple Idea, Complex Reality 

      By JENNIFER ALSEVER (NYT) 1483 words
      Published: March 19, 2006

      TIM TERMAN always looks for the black and white certified Fair Trade logo 
      when he buys bags of coffee from the Mountain People's Co-op in 
      Morgantown, W. Va. He pays nearly twice as much -- up to $10 a pound -- as 
      he would for conventional coffee, hoping the extra dollars go to 
      struggling farmers. 
      That's not always the case. Despite good intentions, most consumers who 
      shop according to their social convictions don't know how much of their 
      money makes it to the people they hope to help. Critics say too many fair 
      trade dollars wind up in the pockets of retailers and middlemen, including 
      nonprofit organizations. 
      But organizations involved in fair trade say the benefits do trickle down. 
      Paul Rice, chief executive of TransFair USA, which controls Fair Trade 
      certification in the United States, said the programs sometimes eliminate 
      as many as five middlemen -- a local buyer, miller, exporter, shipper and 
      importer -- and instead allow farmers to deal directly with an American 
      wholesaler. ''It is empowering farmers to create a powerful export 
      business,'' he said. ''When they do that, they can make dramatically 
      higher prices, often two to three times higher.'' 
      If consumers pay a premium for those products, Mr. Rice said, it means the 
      concept is working. ''They put their money where their mouth is and pay a 
      little more.'' 
      TransFair USA and 19 similar nonprofit agencies in other countries collect 
      licensing fees on each product that uses the Fair Trade label. All of them 
      answer to an umbrella group, the Fairtrade Labelling Organizations 
      International, based in Bonn, which also monitors the farmers and assesses 
      fees for fair trade participation. 
      TransFair describes its logo fees as amounting to just pennies on the 
      pound. The pennies add up. Last year, it generated $1.89 million in 
      licensing fees from companies that used the logo. It also spent $1.7 
      million on salaries, travel, conferences and publications for the 
      40-employee organization. 
      Some critics find such expenses excessive. ''Farmers often receive very 
      little,'' said Lawrence Solomon, managing director of the Energy Probe 
      Research Foundation, a Canadian firm that analyzes trade and consumer 
      issues. ''Often fair trade is sold at a premium, but the entire premium 
      goes to the middlemen.'' 
      Fair trade programs, which promise a ''fair wage'' to family farmers, have 
      grown rapidly. Today, 35,000 retailers and restaurants nationwide, 
      including some McDonald's and Dunkin Donuts stores, carry products bearing 
      the fair trade label, an increase of 60 percent in three years. 
      Since 1999, more than 100 million pounds of certified Fair Trade coffee, 
      cocoa, tea, rice, sugar, bananas, mangoes, pineapples and grapes have been 
      imported to the United States. Sales of fair trade coffee tripled in that 
      time, making it the fastest-growing part of the specialty coffee business. 

      ''There are now 800,000 small-scale farmers benefiting from fair trade,'' 
      said Rick Peyser, director of social advocacy at Green Mountain Coffee 
      Roasters in Waterbury, Vt., which has watched its fair trade coffee 
      products grow two to three times as fast as its conventional lines. Fair 
      trade coffee now makes up 23 percent of its $161.5 million in annual 
      Still, it can be difficult for consumers to quantify the benefit they 
      bring to farmers or to understand the complexities of the programs they 
      ostensibly support. As many as 137 food labels, from ''salmon safe'' to 
      ''ozone friendly,'' try to appeal to socially conscious consumers like Mr. 
      Fair Trade labels don't list the amount paid to farmers; that sum requires 
      research. The amount can vary depending on the commodity. An analysis 
      using information from TransFair shows that cocoa farmers get 3 cents of 
      the $3.49 spent on a 3.5-ounce chocolate bar labeled ''organic fair 
      trade'' sold at Target. Farmers receive 24 cents for a one-pound bag of 
      fair trade sugar sold at Whole Foods for $3.79. 
      The coffee farmer who produced the one-pound bag of coffee purchased by 
      Mr. Terman received $1.26, higher than the commodity rate of $1.10. But 
      whether Mr. Terman paid $10 or $6 for that fair trade coffee, the farmer 
      gets the same $1.26. 
      ''There is no reason why fair trade should cost astronomically more than 
      traditional products,'' Nicole Chettero, a spokeswoman for TransFair USA, 
      said. ''We truly believe that the market will work itself out as Fair 
      Trade certified products move from being a niche market to a mainstream 
      option. As the demand and volume of Fair Trade certified products 
      increase, retailers will naturally start to drop prices to remain 
      In Europe, where fair trade is more pervasive, some critics complain that 
      retailers have taken advantage of consumers who are not price-sensitive. 
      At one point, Britain's largest chain of coffee shops, Costa Coffee, added 
      18 cents to the price of a cup of cappuccino brewed from fair trade 
      coffee. Yet the coffee cost the chain just one or two cents extra, 
      according to research by Tim Harford, author of the book ''The Undercover 
      Economist.'' The chain has since reduced its price for the drink. 
      ''Fair trade products make a promise that the producers will get a good 
      deal,'' Mr. Harford said. ''They do not promise that the consumer will get 
      a good deal. That's down to you as a savvy shopper. You can find out how 
      much farmers are getting and reward retailers who don't try to charge you 
      something on top.'' 
      Each fair trade commodity has its own fair trade price, or the lowest 
      price farmers will receive even if conventional commodity prices fall. 
      That price is meant to allow them to cover their cost of production and 
      improve their lives -- by, for instance, providing money to be invested in 
      their farms and in schools. 
      Yet a price that is fair in one country may not be in another. In Brazil, 
      ''$1.26 per pound for coffee is a fortune,'' said Kevin Knox, a coffee 
      consultant in Boulder, Colo. ''In the forest in the mountains of Mexico, 
      the money barely is enough to justify doing it. Their yields are small, 
      and the costs of production are higher.'' 
      In some cases, the individual farmers may receive less than fair trade 
      rules require because the money goes to cooperatives, which have their own 
      directors who decide how much to pass on to farmers. 
      ''We did a breakdown and saw that sometimes, what they're paying farmers 
      is only 70 cents to 80 cents a pound'' for coffee instead of the entire 
      fair trade price of $1.26, said Christy Thorns, a buyer at Allegro Coffee, 
      a roaster in Thornton, Colo., that is owned by Whole Foods. ''There are so 
      many layers involved.'' 
      Transfair, she said, doesn't ''clearly communicate that to consumers.'' 
      Allegro is among a number of coffee and tea companies setting up their own 
      systems to work directly with farmers and protect the environment. Allegro 
      buys some of its coffee from fair trade farmers, but mostly it buys 
      directly from other farmers, paying them based on quality, not market 
      prices. In some cases, Allegro pays farmers as much as $2.25 a pound, Ms. 
      Thorns said. 
      Starbucks, which bought 11.5 million pounds of fair trade coffee last 
      year, has created a buying program called CAFE, for Coffee and Farmer 
      Equity Practices, and tries to ensure quality and protect the environment 
      as well as maintain equitable relationships with farmers. 
      The company plans to buy most of its coffee through this program, which is 
      overseen by Scientific Certification Systems in Emeryville, Calif. 
      Starbucks requires suppliers to provide receipts showing how each party in 
      the supply chain was paid, but it has no fixed price for the coffee. 
      Starbucks' Web site tells consumers about the program. 
      Still, the fair trade system, which is independent of the food industry, 
      carries weight in the mind of Shel Horowitz, a writer in Hadley, Mass. He 
      buys fair trade products when he can, especially cocoa, after he read a 
      report that much of the cocoa produced in Ivory Coast uses child slave 
      ''When I found out about it, I was horrified,'' said Mr. Horowitz, who 
      asked his wife to return a package of conventional cocoa to the store. ''I 
      didn't want to be party to that. I try to minimize the impact of my 
      consumerism on people who have very little.'' 
      The Fairtrade Labelling Organizations International in Bonn audits cocoa 
      farms to make sure children's rights are protected. 
      SHOPPING activism in the United States has helped funnel $67 million to 
      fair trade farmers and farm workers throughout Latin America, Africa and 
      Asia since 1999, according to TransFair. Without fair trade, supporters 
      say, some farmers have no access to market information and can often be 
      duped into selling to middlemen at below-market prices or, if prices fall, 
      can be forced to quit farming. 
      Ms. Chettero acknowledges the fair trade system is not perfect but said it 
      is a step toward farmers improving their lives. If not for consumers and 
      the fair trade system, she said, ''Who else is going to do it?'' 

      Photo: A Brazilian farmer picks coffee berries on a fair trade 
      cooperative. Fair trade certification guarantees farmers a price that 
      covers production costs and improves their lives. (Photo by David 
      Boucherie/TransFair USA)