Keeping trade fair in Mexico is not easily accomplished for coffee bean farmers

By Hope Bastian

Transnational corporations have started tapping into the fair trade market, taking advantage of U.S. and European consumers’ willingness to pay more for products that they believe guarantee producers in poor countries better prices for their goods.
Over the past year, this has included Sam’s Club -- a nationwide wholesale chain with more
than 500 locations across the United States – and Nestle, one of four major coffee roasters that collectively buy almost half of the world’s annual coffee output.

On the surface, the crossover of fair trade products from a small specialty market to the mainstream would seem a welcome development for small-scale coffee producers in places such as Mexico—the world’s top supplier of fair trade and certified organic coffee. But some Mexican farmers disagree: they say the prices offered by the fair trade market are no longer enough for them to cover production costs and their cost of living.

In 1995, the fair trade price for 100 pounds of washed arabica coffee beans was set at $120, supplemented by a $5 “social premium.” For certified organic coffee, the price went up another $15. Those prices were fair, says Francisco Cruz Sánchez, who has been producing organic coffee for 20 years as part of Yeni Navan, a cooperative of more than a thousand coffee producers in the Mexican state of Oaxaca.
 “In those years the price was very good, very high, because here in Mexico the costs of production and processing were lower,” he said.
Back then, the fair trade market was a lifeline to many small producers. Those without access to this specialty market faced a limited range of equally unappealing options: migrating to find work, taking on loans with exorbitant monthly interest rates or planting other crops—in some cases, illegal ones—to make ends meet.

“As producers of organic fair Trade coffee, we always received 16 pesos, 17 pesos, up to 18 pesos per kilo of coffee,” Cruz Sánchez said. “A conventional, independent producer who was not part of any organization would only receive seven or eight pesos.”

When the free market price for coffee beans slightly improved with the 1996 harvest season, organic fair trade farmers found that although they were producing a more expensive and labor-intensive organic crop, they were only receiving marginally higher prices than non–fair trade producers. These farmers began asking the Fair Trade Labeling Organizations International (FLO) to adjust its minimum prices to reflect the rising costs of production. In 1999, the base price was raised by one dollar to $121 per 100 pounds of green arabica beans; the organic and social premiums stayed the same.

The small price hike has not helped farmers offset rising production costs, nor have prices been adjusted for inflation, which rises by an average of about 6 percent a year. Increasing shipping costs, labor costs and certification costs have also cut into the small profit margins that the fair trade market once promised producers. Ten years ago, it cost the cooperative 4,000 pesos to transport and fill a container at its warehouse with beans for export. Today, the same process costs 10,000 pesos.

Taurino Reyes Santiago, director of Certimex, a Mexican certification body that inspects coffee says:  “Maybe the costs of production are still covered, but the costs of living and the basic necessities that the producer has are no longer covered.”

During the last five years, emigration has increased from Mexico’s coffee-growing regions, forcing more coffee farming families to depend on contract labor to replace that of relatives who moved. Organic coffee farmers have been hit especially hard by labor cost increases. Instead of simply applying chemicals, for example, organic farmers must pass through the fields two or three times to harvest beans at their optimal ripeness. In some areas of Oaxaca, daily wages for laborers doubled in five years.

“[I]n the regions where there is a lot of emigration the labor costs go up 100 percent,” said Reyes Santiago, the Certimex director. Many producers cannot afford the extra labor. Consequently, cooperatives report that the volume of coffee beans they were able to buy from their members decreased in the 2004-2005 harvest because beans were left unharvested for lack of money to pay for labor.

Inspections represent another huge cost for cooperatives that sell fair trade and organic certified coffee. The coffee produced by the cooperative Yeni Navan must go through three inspection and certification processes before it gains access to the fair trade and organic markets.  In the most recent harvest, the internal and external inspection processes cost the cooperative $15,938. It paid another $9,637 to fair trade and international organic certifying organizations.

With the extra investment of time and money that come with being a member of a cooperative, many Oaxacan farmers have found that producing fair trade organic coffee no longer lets them make ends meet. Indeed, says coffee farmer Ofelio Ángeles Ortega, 210 small producers left the cooperative in the last year. Consequently, last season, the cooperative saw its production decrease by 60 percent and it was unable to fulfill several of its contracts with importers.

Many small producers wish FLO would raise the minimum prices to reflect increases in the costs of production and costs of living. Even within FLO there are some like Guillermo Denaux, regional coordinator for Mexico and Central America and coffee product officer, who recognize that the fair trade price is sometimes not enough, but feel trapped between the demands of buyers and traders in different parts of the world.
“There are some buyers who actually find the minimum price too high,” says Denaux.

In the end, the fair trade market is still subject to the free market. “This price has been here since FLO’s existence, and even though there is a lot of pressure to change it, I think that since it is so difficult to find a common agreed point between buyers and sellers there has been little movement,” says Denaux.
FLO’s minimum prices have been a recurring topic of discussion at fair trade producers’ meetings. Cruz Sánchez and other farmers fear that changes in FLO are taking the international organization in an entirely different direction—furthering the trend towards even lower
pricing.

“I think that FLO is now becoming a better friend of the transnational corporations,” he says. For him, recent developments, such as Nestlé’s entrance into the fair trade market, indicate that the fair trade movement is moving further from its roots. And as fair trade becomes mainstream, Cruz Sánchez worries about the huge coffee plantations’ who want to join FLO. If they succeed, he predicts, “It's going to be a disaster, a big threat for small producers.”

Hope Bastian is a native Tallahassean and freelance writer,  who recently returned from Oaxaca, Mexico, where she worked as an educator with Witness for Peace.