Fairtrade a fair price?

our farmers, Chocolate, Cacao origins, Chocolatemakers, Bean-to-bar

Last week there was a beautiful piece about our bean-to-bar chocolate factory in the Parole. A piece with critical statements that quickly triggered discussion about the approach of Fairtrade loosened up discussion. And that is a good thing!

The response 'Criticism of Fairtrade label a misunderstanding' correctly notes that Fairtrade is more than just a premium. That it is a movement that works hard to improve the situation for local producers in multiple ways. Therefore, it is not our intention to suggest otherwise, because we all agree that things must and can be better in the cocoa chain.

But critical of the Fairtrade price & premiumWe are, however. Below we will gladly explain why.

Fairtrade minimum price
In 1994 it was Fairtrade model started for cocoa and chocolate. Fairtrade operates on the core principle of paying a "fair" (fair) price for commodities. At that time, in 1994, the minimum price was set at $1800 per 1000 kg (1 MT) of cocoa. In addition, a premium of $200 is paid which remains intact when the world market price exceeds the Fairtrade minimum price. In 2012, this minimum price was raised to $2000 per 1000 kg of cocoa and the premium is $200.

At the time of its establishment, the Fairtrade cocoa programme the price of $1800/MT was perhaps a fair price. In the meantime, 23 years have passed. A price increase from $1800 to a minimum of $2000 in this period is not in proportion to the reality in producing countries. Indeed, inflation in these countries is robust.

If we were to apply an average annual price adjustment of 2.5% per year (to the minimum price set in 1994), the minimum price would currently be $3200/MT. Therefore, our conclusion is that the cocoa price in real terms has actually only gone down and therefore the Fairtrade minimum price in real terms has also only gone down. With serious consequences (child labor, soil depletion, etc.).

What is a fair price?
Our question is to what extent the current minimum price for Fairtrade cocoa is a "fair" price. One would expect that a fair price would ensure that a cocoa farmer is able to provide for his primary livelihood (i.e. food, shelter, schooling and some plantation maintenance). Unfortunately, reality is still very far from this.

Such an approach that seeks to ensure this exists. It is called "Living Income" (the name says it all). It is described in the Cocoa Barometer 2015. We would argue that the Fairtrade minimum price should guarantee a Living Income for the farmers who participate in the system.

We try to apply this principle in our cooperation with the farmers and are very willing to share our observations and experience. In the end, we all strive for a chocolate sector that is happy for everyone, including the farmers!