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Photo: Sobur, a Fairtrade certified coffee farmer in Indonesia. © Nathalie Bertrams

This summer Fairtrade released important research into coffee farmer household incomes around the world. We interviewed Fairtrade to find out more about the research, next steps and how supply chain actors can partner with farmers to achieve a living income.

1. Why did you decide to commission this research and why was it necessary?

Over 82 percent of the world’s coffee is produced by 17.7 million small-scale coffee farmers, according to the ICO. And while the coffee industry aims to be a sustainability leader, the fact is that many farmers continue to struggle to make ends meet and support their families.
This study was commissioned to develop a better understanding of the current income situation of Fairtrade coffee farmers and provide insights into how Fairtrade can support coffee farmers to improve their income.

In July this year, the first World Coffee Producers forum took place in Colombia, and the final declaration identified the following main aspects contributing to coffee profitability: coffee prices, low productivity, and increasing production costs, of which harvest labour costs play a determinant role.

One of the main results of this study is that coffee profitability is a key element for coffee farmers’ income; therefore the assessment of the overall farmer household income and how much coffee farming contributes to it forms the basis to determine the interventions that will increase income more effectively.

2. What are the negative effects of low farmer income for the farmers?

Low income may have serious consequences for rural families’ livelihoods; limiting their access to education, health services, and ability to save for unexpected events, as well as their ability to address harmful labour practices. It threatens their food security and doesn’t allow them to invest in their farms, leading to decreasing yields.

3. And what are the effects of low farmer income for the rest of the sector?

The study found that in countries where the farmer households’ income from coffee is low; other sources of income play a more important role. Farmers were found to be resilient in a sense that they are resourceful in diversifying their income sources to secure their livelihoods.

This is a clear message to the coffee industry that the future of coffee depends on adequate income for farmers. If coffee farming is not an economically viable activity and the benefits of trade are not being shared more equally in coffee supply chains, a decrease in coffee production is to be expected in some countries.

4. The report finds that low income from coffee leads to a lack of investment at the farm level and even lower yields, perpetuating a cycle of poverty. How can this cycle be broken?

Enabling farmers to invest in their farms is a key priority. Farmers will only invest in their farms if they have the means to do so, and the certainty that their investment will pay off. Securing long-term trade relationships and stable prices that cover the costs of sustainable production are therefore preconditions for effectively introducing investments to improve yields.

In addition, smallholder farmers need better access to finance and strong skills to invest sustainably. Fairtrade believes that producer organizations can play a key role in making this happen. We work to empower producer organizations and equip them with the knowledge they need to better serve their members’ needs, provide adequate technical assistance and/or inputs, obtain financial resources and establish equitable commercial relations.

5. Do other agricultural sectors face similar problems?

Low profitability of smallholder farmers is a challenge in many agricultural sectors. In addition, smallholders face the challenges of climate change, rural-urban migration, land degradation, and others. Coffee specific challenges are the volatility of prices determined by the stock exchange which do not necessarily reflect farmers’ realities, aging coffee farms and a lack of investment for renovation.

6. What role can the public and private sectors play, and how can they cooperate effectively?

We are strongly committed to working with producer organizations and partners to address the issue of living income for farmers, and decent wages for their workers. However, Fairtrade cannot address this issue alone.

Governments and international agencies such as the ICO must play a key role in creating an enabling environment, e.g. by ensuring adequate service delivery and access to affordable finance and inputs to farmers and their organizations. Similarly, companies can support farmers by providing expertise and knowledge, fair trading conditions and long term commitments. Collaboration and the support of governments, civil society and the entire coffee sector are key to achieving sustainable livelihoods for coffee farmers.

7. With many projects aimed at increasing the economic viability of coffee farming, is there a particular case study which has successfully increased farmers’ income?

There are many different initiatives, ranging from productivity and quality enhancement, to organizational strengthening to improve access to finance and reduce costs, or capacity building at farmer level, which have contributed in one way or another to increased farmers’ incomes. We intend to document these cases to enhance our internal learning and make this knowledge available for the international sustainability debate.

8. What are the next steps the coffee sector can take using the information from this report?

Fairtrade welcomes this pilot study as a vital first step in assessing the current income of coffee farmer households, how it compares to existing living income benchmarks and Fairtrade’s potential contribution to addressing gaps that exist. The report shows that there is not a one-size-fits-all solution. Different producer realities require tailor made approaches for different regions. While in some countries improving productivity and quality may yield the highest impact, in other countries we may need to focus on securing markets first and in yet another setting, the best approach could be to encourage income diversification.

We invite everyone in the coffee sector to use this research as a basis for discussions on how supply chain actors can partner with farmers to achieve a living income.

Next steps for Fairtrade:

Fairtrade International, together with the Fairtrade producer network for Latin America and the Caribbean (CLAC ), is expanding the scope of the coffee household income study to Latin America. This project will start this year and is supposed to assess the income situation of coffee farmers, as compared to a living income.

A major next step will be to develop fit-for-purpose benchmarks and refine our living income methodology. We will draw on our pioneering work in developing living wage benchmarks using the Anker Methodology to inform this work.

Fairtrade has developed a holistic Living Income strategy, which constitutes a framework for interventions to close the income gap. This includes sustainable pricing, based on the establishment of reference prices which should allow farmers to make a living income; programs to achieve sustainable yields, improve efficiencies and organizational development. With the collected data of actual household incomes, in comparison with living income benchmarks, we will be able to quantify the gap to reach sustainable livelihoods and determine sustainable price levels as a reference for our price setting procedures. More detailed information on income drivers and barriers of coffee farmers will allow us to design a coffee specific living income roadmap. In addition, the Fairtrade Premium will play a stronger role in achieving organizational and livelihood sustainability.