San Francisco Chronicle

Coffee with conscience

Fair Trade offers farmers a better deal

Network ensures cooperative farmers get paid higher price

Robert Collier, Chronicle Staff Writer

Sunday, May 20, 2001

Colomba, Guatemala -- The 3 de Mayo cooperative is more or less typical for coffee farms. Lush hills, horrible roads, poverty.

But there's also something out of place, something unusual. There's hope in the air.

The 60 families at 3 de Mayo are partners in a pioneering business project that harnesses American consumers' appetites to their desire to do good.

Unlike coffee farmers in Guatemala and elsewhere who are receiving rock- bottom prices for their beans, the 60 families at the cooperative are getting more than double the amount.

The program, called Fair Trade, is similar to the "living wage" concept in the United States.

Supporters say it could be a partial solution to the crisis afflicting millions of coffee farmers and their families worldwide -- giving them a stable, guaranteed price year after year that allows them to improve the quality of their coffee and better their lives.

By getting their beans certified under the label of TransFair USA, an Oakland nonprofit firm, the 3 de Mayo farmers receive the equivalent of $1.26 per pound, rather than the 50 cents a pound that their neighbors get from local middlemen.

"If we couldn't sell our coffee through Fair Trade, we would be destroyed," said Julio Raimundo Perez, the president of 3 de Mayo and head of the board of directors of Manos Campesinas, a federation of seven Guatemalan cooperatives certified by TransFair since the U.S. organization, was founded in late 1998. "Now, we have a future."

The extra money hasn't pulled the 3 de Mayo farmers out of poverty -- they earn only about $3 per day, the nationwide average -- but it has allowed the cooperative to stay solvent and invest in new coffee-processing machinery.

The Fair Trade network, which includes 16 affiliated groups in Europe, Canada and Japan, employs more than 50 inspectors to visit participating cooperatives in 21 nations in Latin America, Asia and Africa to certify that some of the money is re-invested in farm improvements or spent on community social projects.

By buying coffee through the network, retail coffee brands are allowed to display the black-and-white Fair Trade Certified logo on their final package

-- a sign to consumers that the farmers received a decent price for their harvest.

"The problem is that contrary to the TV image of Juan Valdez, most of the world's coffee farmers are not happy and fat and playing with their burros all day," said Paul Rice, TransFair USA's executive director, referring to the famous advertising icon for Colombian coffee.

"They are hungry and taking their kids out of school to work in the fields and wondering how they're going to put food on the table. Fair Trade helps these farmers get organized, form viable marketing businesses and gain direct access to global markets. By selling to Fair Trade buyers, farmers are doubling their incomes, eating better and keeping their kids in school."

A study carried out last year by Coverco, a respected Guatemalan monitoring organization, found that most large and medium-size coffee farms fail to pay minimum wage and routinely violate other labor laws.

These larger plantations are the Achilles' heel of the reform movement. Although Starbucks has asked its growers to end abuses, most plantation owners are hostile to outside pressure. Guatemala's National Coffee Association, a trade group controlled by the largest growers, refused to cooperate with the Coverco report and attacked it after its release, calling it exaggerated.

Association officials did not reply to repeated Chronicle requests for an interview.

Since the first Fair Trade organization was founded in the Netherlands in 1988, it has taken a profitable niche in Europe's coffee business, accounting for 5 percent of total sales. Other Fair Trade products sold in Europe include chocolate bars, orange juice, tea, honey, sugar and bananas.

TransFair USA, only 2 1/2 years old, now accounts for about 1 percent of all

U.S. retail coffee sales. Brands bearing its certification mark are sold at more than 7,000 U.S. stores, including Starbucks, Tully's Coffee, Peet's Coffee and Borders Books. Safeway and Denny's restaurants are planning to introduce Fair Trade coffees.

The concept has made inroads among so-called specialty coffees -- high- quality, higher price brands. But lower quality, mass-consumption brands are less sensitive to their public image, and none has signed up with TransFairUSA..

In Guatemala, only 3.7 million pounds, or 1 percent of the total, are sold through the network.

The campaign's growth has not been without controversy. Last year, for example, students and other activists harried Starbucks incessantly, disrupting shareholder meetings, demonstrating outside stores, mounting letter- writing campaigns and threatening a boycott. The company finally agreed to stock Fair Trade coffee at most of its cafes.

Much of the muscle was provided by Global Exchange, the San Francisco organization that has long carried out in-your-face protests against U.S. corporations over a variety of issues.

But even in the liberal Bay Area, TransFair's job is a tough sell. In an informal poll at several San Francisco cafes and supermarkets last week by a Chronicle reporter, it was apparent that few people had heard of the Fair Trade concept. Is it a new brand, some asked? Or something like the North

American Free Trade Agreement?

"Sounds like a good idea," said one of the few who responded positively -- a man in his 20s named Jason, as he picked up a double latte on Market Street. "Poor people, those coffee pickers. I should buy that kind.."  Then he shrugged and laughed wryly. "But there's so much to worry about nowadays. I hope I remember."

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San Francisco Chronicle

Near-monopoly of retail market a key factor in windfall profits

International prices are low, yielding bonanza for the few

Robert Collier

Sunday, May 20, 2001

Coffee farmers around the world may be feeling the pinch, but there are boom times elsewhere in the business.

U.S. corporations are making windfall profits on coffee -- Starbucks, for example, reported a 38 percent rise in profits this year, caused in part by decreased raw-materials cost and increased prices for its coffee drinks.

Despite the two-thirds drop in wholesale prices over the past three years,

U.S. supermarket prices of "traditional" roasted coffee -- typically sold in 13-ounce cans, ground, drip style -- fell only 8 percent in the same period.

Instant coffee prices rose by 18 percent during that period and high- quality, so-called "specialty" coffees rose by a similar amount -- as have drinks at many coffee bars.

A key factor supporting prices is the near-monopoly control of supply, many analysts say. Only four corporations -- Procter and Gamble, Philip Morris, Sara Lee and Nestle -- account for about 60 percent of U.S. retail coffee sales and almost 40 percent of worldwide sales.

Other factors include rising costs for advertising and coffee-bar rents.

The National Coffee Association, the industry lobby that represents major

U.. S. importers, roasters and retailers, is reluctant to explain their current bonanza.

"As with any product, coffee prices are based on a lot of factors -- the price of raw goods, availability, warehouse stocks, how much consumption is, disruption from frosts and rains, and (retail) market conditions," said association spokesman Gary Goldstein.

Asked why the current low international prices have not led to cheaper coffee in the United States, Goldstein replied, "For antitrust reasons, I can't tell you. We're not allowed to say anything that might have an impact on the market."

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May 14, 2001

Hard pressed Guatemala coffee farmers demand credit

GUATEMALA CITY, May 14 (Reuters) - Hundreds of small-scale coffee growers on the verge of bankruptcy marched on Guatemala's Congress on Monday to demand creation of a fund that would give them access to cheaper credit.

Carrying banners lamenting their economic situation, the producers from the country's eastern borders with Honduras and El Salvador said low world prices had left them unable to buy fertilizer or pay laborers to prepare for next year's harvest.

Low prices this harvest have forced many Guatemalan farmers to leave coffee unpicked on trees. The crisis is affecting exports, which are so far down

5.3 percent from the same period in the previous harvest, according to a report released on Monday by the private growers' National Coffee

Association (Anacafe).

Coffee exports from Guatemala's 2000/2001 crop year through April 30 reached 2,668,923 60-kg bags compared to 2,819,565 through April 20 last cycle, Anacafe said.

Guatemala's Finance Ministry said earlier this year it would ask international lending institutions for up to $150 million to allow growers to refinance costly credit from banks and local loan sharks.

The move must be approved by the Central American nation's Congress.

Until now, little organization has existed between Guatemala's small coffee farmers, who represent the bulk of producers in the Central American nation.

The more than 500 who blocked off access to Congress on Monday said they had joined forces in recent months because of the price crisis.

"If we get no answer, 20,000 of us will come next time," said producer Jose Luis Osorio from the village of Nueva Santa Rosa.

The government of President Alfonso Portillo, which took office in January 2000, set up a program providing growers with cheap fertilizer.

But protesters said there were not enough bags to go around, and that any price would be too high given their current situation.

"Even if it cost five quetzales ($0.64) per bag we couldn't afford it," another grower said.

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