Fairtrade reveals first Living Income Reference Prices for Colombian coffee

Fairtrade coffee prices

As part of its goal to create sustainable livelihoods for coffee farmers, Fairtrade has released its first Living Income Reference Prices for Colombian coffee, based on Fairtrade’s holistic price model.

This model calculates the amount of money Colombian coffee farmers need to be paid in order to have enough resources to invest into their farms and afford a reasonable standard of living. Parameters such as having a viable farm size and sustainable yields are also incorporated.

This income reference guide highlights the importance of sustainable and stable prices in creating a living income that allows coffee producers and their families to afford decent housing, nutritious food, education, health care, and other essentials.

“A living income is a human right – and it’s a precondition for achieving many of the Sustainable Development Goals,” says Carla Veldhuyzen van Zanten, Fairtrade International’s Senior Advisor for Sustainable Livelihoods.

“If growing coffee doesn’t make business sense to farmers, the world will soon run out of coffee, as the younger generation is no longer interested in staying on the farm. A price that supports farmers’ prosperity and covers the costs of sustainable farming practices has to be part of the solution.”

The Fairtrade Living Income Reference Price for conventional coffee is roughly US$2.75 (9900 Colombian pesos) per kilogram of dried parchment coffee and approximately US$3.06 (11,000 pesos) per kilogram of organic coffee.

These prices take into account the additional costs required for farmers to grow the coffee sustainably and pay a living wage to any hired workers.

Taking into account different living income benchmarks across Colombia, Fairtrade has also defined a range of Living Income Reference Prices for Colombian coffee. This sees Fairtrade recommending US$2.23 (8570 pesos) per kilogram for conventional coffee at the lower end, and US$2.48 per kilogram (9500 pesos) for organic coffee at the higher end.

Fairtade says it will work with companies and suppliers that are committed to move forward on a living income pathway through helping to determine appropriate price level combined with their joint ambitions.

The guide was created based on roughly 300 Colombian coffee farmers from nine Fairtrade certified producer organisations who recorded their farm expenses and revenues over a one-year period. This was done using tools developed by Fairtrade and supported by its regional producer network, CLAC.

From here an income baseline was established and the gap between current and sustainable living income analysed. A multi-stakeholder roundtable including farmer representatives and experts from across the Colombian coffee industry then met to discuss the findings and agree on variables in the sustainable price model, such as associated cost of production, product yield and farm size.

This occurred over a six-month consultation period where multiple viewpoints were combined to create realistic and acceptable prices for coffee farmers.

“The results [of the technical roundtable] are valuable for the coffee supply chain, independent of the exact values, because they manifest the need for a fair remuneration, so that farmers can have a decent living,” says Mario Villamil, Economic Research Specialist at the Colombian National Coffee Federation and roundtable participant.

“Although the outcome for standard coffee varies a little from our internal calculations, due to the slightly different assumptions that were made, this exercise is extremely important for us.”

Through this guide, Colombian coffee farmers have the ability to gain greater insights into their business through Fairtrade’s record-keeping tool, with some producer organisations saying they have already negotiated higher prices in their contracts based on this information.

Camilo Enciso, Farmer and Commercial Manager of the coffee producer association ASOPEP in Tolima is happy with current market prices, but predicts risk in the future when prices fall.

“Today in Colombia the domestic price [is] very good. It’s around double what we had two years ago. So, my people are saying: ‘how long are we going to be here?’” Enciso says.

“How can we secure this price into the future? If prices would really stay like this, we would make so much more progress. But working at a loss, without knowing at what price we’re going to sell is very complicated.”

The Fairtrade Minimum Price and Premium are still mandatory for all Fairtrade Coffee sales. These provide a safety need for coffee farmers when the market price of coffee falls, and has supported many farmers during the recent coffee crisis.

Fairtrade says it will continue to develop living income projects with coffee companies and producers to help close the income gap. This includes ways to optimise yields and improve product quality while maintaining the Living Income Reference Price.

“It would be great if the end consumer truly understands that this is what we require. We live in a country with many temptations, where people have other, perhaps easier, options to make a living, for example, illicit crops, coca and poppy seeds,” says Enciso.

“Fortunately, there are currently no illicit crops in this territory in the south of Tolima. But we are fighting hard to ensure that coffee can sustain our families.”

For more information, please visit www.fairtrade.net

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