Alexander Gillespie: A fair price to growers makes coffee taste a little better

Fair trade certified coffee guarantees that the producers are paid a stable, minimum price per pound for their product. Photo / Jason Oxenham

Every time we have a cup of coffee we are presented with an ethical choice.

The modern consumer lives in an ocean of product labelstouting some special ethical value. Dozens of ethical options face the shopper for coffee alone.

Some of the claims are robust while others put the "con" back into consumer. It is known that some consumers will pay a small premium for a particular ethical direction, even if that price is sometimes gouged, so it is essential that individuals interested in this area do their homework. Scepticism is warranted.

One of the most important steps when considering any product or service claiming ethical benefits, be they free-range eggs or the recycling of electronic waste, is the word "certified".

When coffee producers promise coffee which is organic, recyclable, rainforest friendly, or fair-trade, such assurances need to be shown to be true.

The clearer the promises and the more independent and transparent the verification, the better.

The Environmental Choice New Zealand label is a good standard. However, the scope of what is covered is poor, with many important products not subject to review.

The ethical priority with coffee should be around its price, which has nothing to do with the cost of a cup of coffee to a consumer.

Unlike many other commodities, such as coal or oil, where price falls are passed on to the final consumer, coffee is different.

Aside the specialist coffees which operate in their own micro-climate, the international market for coffee is over-full with supply.

Global production, which was 6 million tonnes a year at the turn of the century, is now some 8.2 million tonnes annually.

The ethical priority with coffee should be around its price, which has nothing to do with the cost of a cup of coffee to a consumer.

The product, which sold for US$3.40 a pound in 1977, went in to freefall when the commodity agreement that tried to regulate its price disintegrated in the 1980s.

By 2001, it was selling at US45c a pound. Although prices rose again to an average of US$1.65 per pound in 2015, by 2016 it had fallen to US$1.11.

The people who really feel the fall in price are those who grow it.

As the producers only ever get a fraction of the price, typically around 10 per cent, price falls are often disastrous.

The ones who weather the storm best are the 750,000 people selling fair-trade coffee. That leaves 124 million other people growing coffee who are currently suffering costs of production above what they are selling their product for.

Fair trade certified coffee guarantees that the producers are paid a stable, minimum price per pound for their product.

If these producers meet certain criteria in terms of social organisation, such as democratic cooperatives, the price paid for their coffee will not fall below a minimum price.

That meant that last year Arabica organic was going for US$1.40 a pound, which included a 20 cents premium for development purposes.

If coffee prices rise, they get more than this, but if they fall, they do not get less. This safety net of a price guarantee allows them meet the most of basic health and education needs.

For the individuals who choose to support fair trade products, it is important to understand that these actions will not change the world. This is because fair trade, organic and similar eco-friendly coffees only occupy about 2 per cent of the total coffee market in the developed world, although this figure differs greatly between countries, ranging from 20 per cent in Britain to 10 per cent in New Zealand and 3 per cent in France.

Such percentages barely register.

The small market share for ethical coffee is but a subset of a much larger equation, that fair trade products make up a mere 0.1 per cent of the economic value of goods traded worldwide. Although the purchase of such products may not change the world, the ethical consumer, if they feel they have not been exploited or cheated in the process, can take extra pleasure in the taste of their coffee, knowing that their purchasing choice made a bad situation somewhere a little bit better.

Alexander Gillespie is author of International Environmental Law, Policy and Ethics.