Farmer-owned Cooperatives are the Foundation of Fair Trade…and for good reason

Written by Cafe Campesino on Apr 7, 2011 in Editorial, NEWSLETTER, Trips |
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Fair Traders: Members of Cooperative Coffees and other travelers pictured with Don Pedro Pacheco Bop, a small-scale coffee farmer who is a member of the Associacion Chajulense. Photo taken in Chel, Guatemala, on March 26, 2011.

Fair Traders: Members of Cooperative Coffees and other travelers pictured with Don Pedro Pacheco Bop, a small-scale coffee farmer who is a member of the Associacion Chajulense. Photo taken in Chel, Guatemala, on March 26, 2011.

Farmer-owned Cooperatives are the Foundation of Fair Trade…and for good reason
By: Tripp Pomeroy

Greetings from Americus!  We have just completed an 8-day journey to Guatemala where we visited one of the first cooperatives we ever bought coffee from – APECAFORM/Manos Campesinas, met with a new trading partner – CCDA – and then wrapped up with a visit to our other long-standing trading partners at La Chajulense.  On the balance, the news is good, as more money is getting back to the farmers and the co-ops with which we work have proven themselves to be extremely effective in the face of unusual volatility in the coffee market.   The tough news is that yields in Western Guatemala this year were very low, though next year is looking to be considerably better.  On the Fair Trade front, the good news is that our direct trading relationships seem to be stronger than ever and reciprocally so (to be explained below).

 

A quick note on the current coffee market volatility.  Coffee prices on the New York C (NYC) on which all coffee contracts are based (we pay based on the NYC plus organic and Fair Trade premiums plus a differential that is based on quality, the needs/costs of our trading partners, and other variables) have reached 14-year highs during the past several months.  On top of the high market prices, it has become increasingly common for narco-traffickers to launder their revenues through local coffee markets.  High NYC prices and the additional cash provided by money laundering have presented a number of challenges for our trading partner co-ops, the most significant of which has been the temptation for co-op members to sell some or all of their coffee to coyotes (local middle men) rather than deliver it to the co-op.   In turn, if the co-op can’t get its members’ coffee, it can’t fulfill its commitment to its buyers like us at Café Campesino and Sweetwater, who buy our coffee via our membership in Cooperative Coffees.

 

Fortunately, what we learned in Guatemala is that the cooperatives we work with – APECAFORM/Manos Campesinas and La Chajulense – have done a phenomenal job managing their co-ops through the current volatility.  Specifically, they have developed and implemented extremely savvy strategies to beat the coyotes at their own game, while also offering all the added benefits that a co-op has to offer its members.  By increasing prices, communicating with their members, and managing their liquidity strategically (by leveraging the pre-financing that they have access to via their Fair Trade relationships with organizations like ours), our trading partners have been able to outmaneuver the coyotes and not only bring in the coffee they need to fulfill their contracts with buyers but also pay their members very good prices for their coffee.

 

Customers and other folks interested in Fair Trade often ask us how much of what we pay for green beans actually gets back to the individual farmers.  The rule of thumb is that we expect about 75% of what we pay farmer co-ops like Apecaform and Chajul to get back to their individual members (all co-ops have operating expenses that must be covered as well).  What we were able to verify at APECAFORM and Chajul is that both co-ops paid their farmers over $2.10 per pound for the most recent harvest, provided a number of services at no charge (transport of coffee being one), and anticipate paying an additional “bonus” once they have closed the books on this season sometime in May or June.

It is important to remember that Fair Trade is about companies like ours working directly with small-scale farmer co-ops.  In Guatemala we saw first-hand that when properly managed, co-ops afford their members better prices for their coffee than do local coyotes not only when coffee prices are depressed but also when coffee prices skyrocket, as they have been doing for the past several months.  Co-ops also provide many services that coyotes do not, including: financing, technical support, and access to other programs that assist small scale farmers in areas like food security.  And, perhaps, most importantly, co-ops provide otherwise disenfranchised small-scale farmers with ownership and a vote in the operation of the coffee business.

 

In the opening paragraph, I said that on the Fair Trade front, the good news is that our direct trading relationships seem to be stronger than ever – from both sides of the coffee transactions.  And the strength of our direct trading relationships is based in large part on the strength of our trading partners’ co-ops and the depth of their commitment to us, as loyal, fair trade buyers.  Both APECAFORM/Manos Campesinas and La Chajulense appear to be in great shape, having weathered this volatile coffee season successfully.  Further, both groups made it clear to us that they felt a responsibility to not only treat their members right but to also treat us, as their long-standing trading partners, right as well, acknowledging that they understand that there are limits to what we can charge for our coffee in the competitive US market.

Ultimately, we have found that our trading partners in Guatemala have reciprocated on our loyalty to them when coffee prices were low by providing us with the coffee we need at competitive prices in this current, unusually high market.  This is heartening news not only for Café Campesino, Sweetwater, and Cooperative Coffees, but also for the Fair Trade movement as a whole.  Our visit to Guatemala confirmed that farmer-owned cooperatives and direct trading relationships guided by the principles of Fair Trade do, in fact, work.

 

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