Study Finds Nicaragua Fair Trade Farmers End Up Poorer

 
By 16 May 2011
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Bleak. Weak. Whatta way to start the week.

That fair-trade cup of coffee we savour may not only fail to ease the lot of poor farmers, it may actually help to impoverish them, according to a study out recently from Germany’s University of Hohenheim.

The study, which followed hundreds of Nicaraguan coffee farmers over a decade, concluded that farmers producing for the fair-trade market “are more often found below the absolute poverty line than conventional producers.

“Over a period of 10 years, our analysis shows that organic and organic-fair trade farmers have become poorer relative to conventional producers.”

Click through here to learn more from the National Post.

 

 
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  • Hi all,

    You can find a great video response from Stacey Toews, co-founder of Level Ground Trading, a Direct Fair Trade organization out of Victoria, BC, Canada here- http://www.youtube.com/watch?v=KaVh2vHHb4A&feature=channel_video_title

    And a written response here -http://www.levelground.com/transparency/14/

    Cheers,
    Andrew Patrick, Level Ground Trading

    Reply
  • Jeff says:

    Fair Trade is certainly not beyond criticism. However, the diatribe by Mr. Solomon against Fair Trade certification this week can only be considered cheap, and possibly, ill motivated.
    Mr. Solomon claims to be seriously involved in the business of coffee. He founded the Green Beanery seven years ago to raise funds for his employer, Energy Probe, a respected environmental think tank. .By chance, I visited the Green Beanery when I was in Toronto last week . I would have to say, he “dabbles” in green coffee. Variety is his claim to fame. He obviously buys fairly small amounts of a great variety of “green”(unroasted) coffees from large coffee.brokers. I would doubt if he has had much, if any ,direct contact with coffee producers as he suggests.

    The question is: Why would he want to totally discredit Fair Trade certification when even the studies he quotes in his column and has on his website (www.probeinternational.org) attest to the fact that, indeed ,“fair trade does benefit coffee communities” in spite of its limitations.
    It is ,perhaps, no coincidence that Solomon ’s boss, the chair of the Energy Probe board, is none other than Gail Regan who is also head of Canadian food giant Cara Foods. Cara owns ,or has owned, Second Cup, Harvey’s, Swiss Chalet and institutional catering operations that included food services on Air Canada (Oh my.) They have been a long time detractor of Fair Trade. I can vividly remember a screaming match at a Canadian coffee conference in the late 90’s between a Second Cup executive and the head of Fair Trade Canada..

    It is somewhat understandable, if inconsistent, that Mr. Solomon and Ms. Regan would use non-Fair Trade and non-organic coffees to raise funds in support of Energy Probe. However, it is clearly disingenuous when they move from the politics of energy to the politics of coffee and pretend to do so out of concern for the welfare of small coffee producers.
    Thoughtful coffee drinkers do value independent third party certification to verify corporate marketing claims. Renu Mandhane, Director of the International Human Rights Program, at the University of Toronto, Faculty of Law, commented this week on the ethics of Canadian mining companies working abroad. He feels strongly that: “We need to move beyond corporate self -regulation in the area of human rights. “ In the end, Fair Trade is ultimately about human rights in the face of large corporate interests.

    Reply
  • Peter G says:

    Good discussion.

    It bears pointing out that Lawrence Solomon, as a writer, seems to obviously trade in the ludicrous counter-intuitive shock-freakonomics that seems to pass for journalistic opinion. Check out his other work: like “Don’t Bother to Vote”, for example.

    It is easy and attractive for a journalist to try to eke out a story from a reasonable study as was done here. A saucy headline, a little fearless iconoclastic rejection of the conventional wisdom…. now we ARE ON TO SOMETHING.

    In reality, this is the kind of noise that keeps consumers and citizens jumping from misguided notion to misguided notion. By now it’s clear that Mr. Solomon misrepresented the study, in favor of his pet antagonism towards fair trade and organic. This, of course, is mirrored by the coffee industry’s mistrust of those ideas, which are usually similarly poorly researched and justified.

    Can we expect better of the journalistic community? I think we should. I’ve met a bunch of writers in my life, and most are thoughtful, intelligent people. I don’t really know why they continue to do this kind of thing. Most will tell you that controversy sells papers, and that they are struggling to get people’s attention. I think we can expect better than that.

    The realities of certifications, poverty, and agriculture are really really complex. Let’s keep talking about them. I’ve got some reading to do.

    Peter G

    Reply
  • Rob Clarke says:

    Fairtrade Canada response to Lawrence Solomon’s National Post story “Fair-trade coffee fix”

    Fairtrade aims to offer producers a better deal and improved terms of trade. We are constantly working to deepen Fairtrade’s impact on producers and we welcome rigorous research and healthy debate around these issues. Lawrence Solomon’s criticism of the system in his May 14th article “Fair-trade coffee fix”, however, is highly flawed.
    Firstly, Mr. Solomon claims that a recent study in northern Nicaragua indicates that Fairtrade coffee may help to impoverish farmers. What he neglects to mention is that the Fairtrade producers studied received higher farm-gate prices than conventional producers and that significant production losses (unrelated to Fairtrade) may have accounted for revenue loss. While the study’s findings may highlight the need for further research, Mr. Solomon‘s suggestion that these results are generalizable is highly flawed, given that the authors conclude that the study results cannot be applied to regions beyond the study area.
    Secondly, Mr. Solomon purports that Fairtrade discriminates against the poorest of the world’s coffee farmers, many of whom are in Africa, through high certification fees. While it does cost money to uphold the system’s rigorous certification standards, these costs are split amongst the hundreds or thousands of members that belong to the co-operative. Fairtrade International offers funding for impoverished producers to meet up to 75% of the cost for poorest producers through its Producer Certification Fund. In addition, according to Fairtrade International’s 2008 figures, 60% of Fairtrade individual farmers and workers are, in fact, based in Africa.
    Thirdly, Mr. Solomon again criticizes the Fairtrade certification system as being “lax and almost impossible to police.” FLO-Cert, an independent organization that conducts rigorous producer audits, ensures that relevant social and environmental standards are met and that producers receive the Fairtrade guaranteed price and premium. FLO-Cert is ISO 65 certified, and ISO 65 is the leading, internationally recognized quality norm for bodies operating a product certification system.
    Finally, there is indeed a reason why many Fairtrade merchants refer to the many additional benefits of Fairtrade: Fairtrade is about much more than price.
    Beyond a minimum floor price that protects coffee producers from the volatility of world markets, organizations receive an additional sum of money called the Fairtrade premium. This money goes into a communal fund for workers and farmers to use to improve their social, economic and environmental conditions. Smallholder producers, as landowners who choose to join democratically-owned co-operatives, are in the best position to determine how to meet their own needs. As such, these individuals determine how the premium will be spent, investing in, for example, education and healthcare, farm improvements to increase yield and quality, or processing facilities to increase income. In 2009 alone, the Fairtrade system returned €53 Million to producers in Fairtrade premiums.
    And there’s much more to Fair Trade, such as access to credit, long term contracts, transparency and accountability, the prohibition of forced and child labour, gender equity and environmental sustainability. Needless to say, Mr. Solomon is wrong in saying that consumers have something to feel guilty about. Globally, consumers spent €3.4 Billion on Fairtrade products in 2009, contributing to a market-based system that benefits more than 1.2 million farmers, workers and their families, and recently joined in celebrating Fair Trade Fortnight and World Fair Trade Day across Canada. We’d call that something to feel great about.

    Reply
  • Polly says:

    Qwell Put & thank you Mark & Smantha…..Inman, we need you now more than EVER.

    Reply
  • Mark Inman says:

    But…..would wholeheartedly agree with Mr. Cho that I have no problem with the abstract. My issue is with the hack writings of Mr. Solomon and the medias spread of his steaming pantload of an article yesterday

    Reply
  • Mark Inman says:

    Yeah, Rich, I did read the study as well as the article and here are the glaring take-aways from it:

    1. Africa was mentioned only once and it was in reference to Kenya- not relevant to anything positive or negative. How Mr. Solomon deduced anything about Africa- other than his own anecdotal evidence is a mystery to me.

    2. All three examples (FTO,Org and Conventional) all had very simplistic agricultural practices. Yields in all three cases paled in comparison to global coffee yields of comparable farms. “Poorly managed plantations, insufficient fertilization and low planting densities,” was a key quote.

    3.While the Gross margins did favor certified organic farmers (as well as highest efficiency), in the end, “No significant difference exists between these three groups.” This statement, made numerous times throughout the study, flies in the face of Mr. Solomon’s provocative headline as no farmer fared markedly better than the other.

    4. The suggestions in the end of the study of ” investing in the farm, business management skills of producers as well as the establishment of public extension and production support systems.” and “Adequate financing,” should not come at the cost of either model as they all have an equal opportunity to benefit from that advice.

    5. The tell tale suggestion for organic producers of, ” creating a central organic fertilizers to be sold to [cooperative] members’” is sound, yet easier, less labor-intensive and more effective methods exist. Fermented preps, vermicompost in the form of “worm teas,” increased poultry production on farm (where nitrogen can be made available to trees and laying high-mineral rocks on roads which will increase mineral levels is much more effective at increasing both soil health and yields.

    In the end- it sucks to be a small farmer, looking at global average size of farmer holding >4ha. There is hardly a chance of ever escaping the grips of poverty. Diversification at farm level (increased food and livestock production) just allows for the escape of extreme poverty and malnutrition, and will never lead toward stable and vibrant communities. Given any viable alternative at earning a living, most small farmers would have no choice but to abandoning coffee farming or farming of any crop, entirely.

    A very good topic to discuss, indeed.

    Reply
    • Mark, I would disagree on the major take away.
      The purpose of the study was to “provide quantitative evidence to policy makers and donors who are currently supporting or planning to support certification schemes as a tool to reduce poverty”.
      Clearly, in this part of Nicaragua, no matter how the coffee is grown, no matter what logo we use, the evidence shows certified farmers are not doing better than conventional farmers. According to the study total per capita income is less than $500 USD per year. If we put that in a pamphlet for customers to review I wonder if they would think their goodwill and trust is being well served with certifications. Ask most Fair Trade customers and they are under the impression the children are attending schools in pressed white shirts, with free dental and medical care. We need to stop misleading our customers. Fair trade does not mean better off farmers and families in this part of Nicaragua and that is not what is promoted within the industry. The approach in determining farm income taken by the study’s authors is correct. Farm gate pricing means nothing if your overhead, depreciation and labour costs are significantly higher than your competitors. This discussion is fantastic, but the take away is that certifications as a scheme to increase real farm income need to be held accountable for their claims. The study shows that the people who matter most, the farmers, don’t think the certifications are working. Who are we to argue.

      Reply
  • Nick Cho says:

    btw, Poul Mark posted a GREAT blog entry on the study: http://t.co/Ci3OeUh

    Reply
  • Nick Cho says:

    Rich,

    I’ve read the study. It’s a good piece of academic work.

    Even before I read the study, my beef has never been with the abstract of the study, it’s the press coverage and commentary that it has generated.

    I think you’d agree?

    Reply
    • Nick, I do completely agree. The misinformation and irresponsible nature of all press is something I take for granted and therefore I largely ignore Soloman’s spin in the article. The point I left unsaid is that the study is comprehensive and should not be disregarded just because of the quality of the journalism. The benefit of the Financial Post article is that it has generated interest for a study that may have otherwise escaped our attention.

      Reply
  • Jenny says:

    The term “yellow journalism” actually doesn’t have anything to do with race. It refers to the quality of the article and the research contained therein.

    Reply
  • If you are directing your comments to the validity of the study, read the study (I have) then comment. You might learn something new.

    Reply
  • Adam Pesce says:

    Nick, Mark and Samantha all make points too strong to disagree with, and likely with less preparation than went into the National Post editorial that has spawned this discussion.

    The article talks in strokes too broad to have any validity. Are Fair Trade or Organic certifications perfect? Certainly not, not alone, in their means or their ends. However, they are both have their place as part of the bigger fix we are looking for in the quest to make coffee truly sustainable – socially, environmentally and economically.

    I think Nick’s rebuttal is especially important, that Nicaragua is not a fair sample to judge the industry on. No country could be. I’m sure anyone who has spent time at origin would agree that the issues facing each country, and further, each region in those countries, are unique and not to be homogenized into sweeping generalizations. Yes, all producers need to make more money for their crop, but their situations and the the solutions each producer needs to raise themselves up, cannot be quantified in any single study.

    That being said, it’s easily the final sentence that I find most troubling -
    “And in this well-intentioned pricefixing game, the fair-trade farmer is the pawn and the joke is on the customer.” Not only does this demean any and all of the good that fair trade has done and continues to do (don’t be mistaken, it’s effect can be profound), but it insults those who believe in the principles behind it. It’s not price-fixing and no certification is a guarantee for the best price on the market. Only quality can do that.

    As one of many in Specialty Coffee who supports organizations like Fair Trade, organic certifiers (there are many), Rainforest Alliance, Utz, Coffee Kids, Grounds for Health, Cup for Education and just about any other group willing and able to do real good in coffee country, I’ve got to say that now, more than ever, it’s important to focus on all the positive that we as an industry are doing. It’s abundant, ever-growing and comes from a place of genuine concern for those who provide us with the coffee that we love so much. We’re still trying to figure it out, and we will.

    Reply
  • Mark Inman says:

    Michael,

    Thank you for adding depth to this discussion…..

    Mark

    Reply
  • Mark Inman says:

    Samantha,

    You could not have said it better…

    Reply
  • Michael says:

    I work at origin with smallholder farmers who see certifications as one strategy for increasing income and reducing market risk. I appreciate both the expressions of concern here over the implications of this article and the impulse to get to the source of the article and carefully digest the details. While I haven’t had a chance yet to read the full article, even the abstract I just posted provides some initial illumination.

    What is immediately striking is that any intelligent comment on the study must be as careful in its analysis of the findings as its authors were in generating them to begin with. In other words, this is serious research — 10 years, 327 randomly selected farms, more than 100 in-depth qualitative interviews — of the kind that we rarely have the luxury to consider in the contested terrain of coffee certifications, where passions run deep and individuals and companies alike have more than a little invested in the success/failure of one certification or another.

    The other thing that jumps off the page for me is the important distinction the study makes between prices and net income. While most of the consumer and industry-level communication around FT/O coffees focuses on prices, what is relevant to the lived realities of smallholder farmers, of course, is net income. Naturally, prices for certified coffees are almost always higher than prices for non-certified coffees (of similar quality, as Mr. Inman takes care to point out) — a rule that has bent in recent high markets but not broken fundamentally, as far as I can tell. What this study seems to do is examine the cost structure of certified coffee production in a way that the exclusive focus on price is destined to obscure. As any roaster or coffehouse owner knows well, the focus in on the margins — not sales revenue but net income.

    Finally, as Mr. Inman points out, the distinctions between the two certifications mentioned in the study — Fair Trade and organic — in terms of requirements, cost structures, market differentials, and produtivity implications, for starters, is fundamentally important. The abstract doesn’t break out the differential impacts on household income of FT and organic certifications, although I suspect the full study takes greater care in this regard. The relative carelessness of the piece cited here, which seems to want to lay all the blame at the feet of Fair Trade Certification, is unfortunate.

    Based only on my (modest) experience in Nicaragua, and without having read the full study, I would guess that while the cost structures of the two certifications could contribute to the relatively greater incidence of poverty among producers of certified coffees than among producers of conventional coffees, it is more likely there that the adverse impacts of organic certified farming on yields is more responsible for the reduction in both gross revenue and net income among smallholder farmers. While all the evidence I have seen suggests that Mr. Inman is right — organic productivity levels can rival and indeed outlast those achieved under convention farming systems — it is also true that productivity can decline precipitously upon “transition” from conventional to organic practices. It is also true that smallholders are at a systemic disadvantage in terms of maintaining the soil fertility necessary to achieve those higher yields. Quite simply, few smallholders can generate enough organic inputs on-farm to fertilize their coffee at optimal levels, and fewer can afford “technified” organic farming.

    All of which suggests to me that we all need to really read and digest the article as a first step.

    From there, one of the most interesting implications of the article may be the suggestion that organic may not be a smallholder certification after all — a conclusion that Mr. Inman seems to have already made: “there is no real reason to choose organic certification if you are a small…farmer.”

    Looking forward to reading the article and further discussion of the economics of organic certification (especially for smallholders).

    Michael

    Reply
  • Michael says:

    The full article costs $39.95 and is available for electronic delivery here:

    http://www.sciencedirect.com/science?_ob=ShoppingCartURL&_method=add&_udi=B6VDY-52GB8W5-1&_acct=C000050221&_version=1&_userid=10&_ts=1305596365&md5=5c9c489473d51e5fa95d76b3abf741d4

    Meantime, here is the abstract from the article:

    Abstract
    Governments, donors and NGOs have promoted environmental and social certification schemes for coffee producers as certified market channels are assumed to offer higher prices and better incomes. Additionally, it is presumed that these certifications contribute to poverty reduction of smallholders. Yet, gross margins, profits and poverty levels of certified smallholder coffee producers have not yet been quantitatively analyzed applying random sampling techniques. Our quantitative household survey of 327 randomly selected members of conventional, organic and organic-fairtrade certified cooperatives in Nicaragua is complemented by over a hundred qualitative in-depth interviews. The results show that although farm-gate prices of certified coffees are higher than of conventional coffees, the profitability of certified coffee production and its subsequent effect on poverty levels is not clear-cut. Per capita net coffee incomes are insufficient to cover basic needs of all coffee producing households. Certified producers are more often found below the absolute poverty line than conventional producers. Over a period of ten years, our analysis shows that organic and organic-fairtrade farmers have become poorer relative to conventional producers. We conclude that coffee yield levels, profitability and efficiency need to be increased, because prices for certified coffee cannot compensate for low productivity, land or labor constraints.

    Michael

    Reply
  • Samantha says:

    I actually had read the paper by Beuchelt and Zeller before I saw this article about it…It is a shame because the journalist did make conclusions from the paper that were different than those originally made by the authors.

    To me, at least, one of the points/surprising things that the authors of the paper learned was that, contrary to their hypothesis, input cost for organic production is relatively similar to that of conventional production because of increased labor cost, and the cost that exists for organic fertilizers/compost. They state that in order to sustain high enough yields under organic production, the farmers truly have to be stewards of the land…organic does not mean doing nothing.

    They also found that under certain market prices, the fair trade and fair trade organic producers ended up making much more money than conventional farmers (the authors cite 2002/2003 when coffee prices dipped dramatically), but that the increased revenue from those years did not parlay into increased revenue in 2011, when conventional coffee prices are higher.

    The authors of the paper actually concluded with a really great point:

    “We recommend that the policy focus of government and donors should move from certification schemes to investments in the farm and business management skills of producers as wells the establishment of public extension and production support systems”

    As I read it – guaranteeing a higher price for farmers is well and good, but if they don’t have the education/resources to efficiently farm their land, the benefits of that pricing floor is not reliable.

    The paper can be found in Ecological Economics Vol. 70 (2011) pages 1316-1324 by Tina D. Beuchelt and Manfred Zeller.

    Reply
  • trish says:

    Very good read, Mark. Thank you.
    Go Mark Thinman!

    Reply
  • Mark Inman says:

    While I have numerous issues with this hackneyed article by Lawrence Solomon, which Mr. Cho lables as “Yellow Journalism” (Why does Mr. Cho throw such racist remarks? How does he know if Mr. Solomon is Asian?), I am more interested in reading the actual study by the University Of Hohenheim. Upon numerous searches, I was unable to locate the study. As you may know with these things, the Devil is in the Detalis and the paraphrasing by Mr. Solomon does not support anything.

    1. He seems unable to distinguish between FTO certification and Organic Certification. Both programs are overseen by different groups with different standards and different costs.

    2. Most Fair Trade farmers are not from Africa

    3. Farmers do not pay high certification fees to participate in the Fair Trade program. Organic, yes, but there is no real reason to chase organic certification of you are a small >1ha farmer.

    4. “Organic by Default” Is a myth. There is no such thing. Organic is not simply growing without chemical inputs. It is much more involved than that. If Mr. Solomon actually paid attention to his own certification as a roaster he would know this.

    5. The conclusion that policy “move from certification schemes to investments in the farm and business management skills of producers” is accurate. But this investment would benefit both certified and conventional farmer.

    6. Mr. Solomon states that, “it is an open secret that the certification process is lax and almost impossible to police.” Again, is he talking about the FT certification process or Organic? In my 23 years as an organic coffee professional, I have never been let in on this “Open” secret.

    Here are the key takeaways from FT/Organic models:

    1. FT/Organic systems favor those who invest in education and development of their farms. One can not expect to participate in these programs, do nothing new and make more money.

    2. They deliver more revenue to growers who produce quality at comparable levels to high-end specialty. Low grown, mediocre certifieds do not warrant higer premiums as they are not competitive on either price or quality.

    3. If you understand organic agriculture at all, you can increase yields with inputs that can be created with materials on the farm or nearby and save by not having to purchase synthetic inputs (which have risen over 40% over the past year. A basic cocktail sketch can show that that alone offers an opportunity to make more income.

    4. Organic-Certification is not a “Catch-All.” It is costly to certify a farm and maintain paperwork It will not work for the smallest farms , unless they are organized in a cooperative which is not always desirable or feesable.

    Mr. Solomon should do his homework a little more before he sticks his neck out there next year during “Fair Trade Month…”

    Reply
  • Nick Cho says:

    A few comments:
    1) The Hohenheim study was about organic and fair-trade organic. Why is your headline “Fair Trade Farmers End Up Poorer?” That’s a pretty serious mistake, and could easily be considered yellow-journalism.
    2) Nicaragua is not a good example for the industry as a sample. Nicaraguan coffee-farmers’ main problem is scale: the farms that tiny almost guarantee an un-sustainable condition, with the land-apportionment being related to the country’s political history.

    Poverty is an absolute tragedy, with the plight of Nicaraguan coffee farmers spotlighted by the documentary “After the Harvest” (http://aftertheharvestorg.blogspot.com/). However, jumping on the anti-FairTrade bandwagon seems to be even less fruitful than the FairTrade bandwagon. Any version of “jumping on the bandwagon” tends to oversimplify the complex issues, but sometimes in the effort to go against the flow, we inadvertently support the greater of the two evils.

    Reply
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