Pay Us a Fair Price for Our Coffee, and We Will Make Poverty History for Ourselves

HOW NEW ZEALANDERS BUYING FAIRTRADE BENEFITS PRODUCERS IN DEVELOPING COUNTRIES

This report has been produced by Fairtrade Labelling Australia & New Zealand (FLANZ) and Oxfam New Zealand. Analysis has covered the period of New Zealand Fairtrade purchases and sales from 1 January 2004 to 31 December 2009.

© April 2010

“‘Pay us a fair price for our coffee, and we will make poverty history for ourselves. Kimaro of the Kilimanjaro Native Co-operative Union FAIR TRADE is a global movement tackling poverty and empowering producers through trade. Fair trade’s purpose is to create sustainable market opportunities for producers in developing countries who have been economically disadvantaged or marginalised by the conventional trading system. Fairtrade Labelling is a global network of non-government organisations pursuing the fair trade agenda through the certifi cation and labelling of products, such as coffee, tea and chocolate. The Fairtrade Label allows consumers to identify products that meet agreed environmental, labour and developmental standards. The Fairtrade Labelling system is overseen by a standard setting body, FLO International, and a certifi cation body, FLO-CERT. Certifi cation of Fairtrade involves independent auditing from production to packaging of products ready for consumption.

PROVIDING A FAIR DEAL FOR FARMERS AND WORKERS Fairtrade Labelling provides farmers, workers and their communities with real economic, social and environmental benefi ts for the Fairtrade Certifi ed products they sell. The Fairtrade Standards defi ne the rules of Fairtrade trading and outline a number of benefi ts that must be provided to Fairtrade producers and their organisations. These include:  The Fairtrade Minimum Price: designed to cover the costs of sustainable production. The Minimum Price acts as a fl oor price that protects farmers from unsustainable downturns in the market and offers them stability and security of income.  The Fairtrade Premium: an additional fi nancial payment to producer organisations over and above the Fairtrade Minimum Price (and any FAIRTRADE CERTIFICATION Organic Price Differential) for investment in improving social, economic Fairtrade Certifi cation and auditing is conducted by and environmental conditions in the community. independent third party organisations. To receive  The opportunity for pre-fi nancing: allows producers to access up to certifi cation producer organisations must meet minimum 60% of their fi nal Fairtrade contract value in advance to enable them to standards and pass an on-site inspection. Successfully get the product to market. meeting these requirements leads to the granting of Fairtrade Certifi cation for a three year period. During  Long-term contracts: allow for stability and predictability and therefore that period the producer organisation will undergo two future planning. surveillance audits and then a renewal audit at the end of  Access to export markets: facilitated through the Fairtrade network to the three year period. improve market opportunities for producers. Traders are audited to ensure they are paying the Fairtrade  Being organised into democratic organisations: means that producers Minimum Price and Fairtrade Premium to certifi ed are in a better position to negotiate with exporters, to invest in skill producers, and maintaining supply chain traceability. development and to deliver community development projects. Similarly, wholesalers and manufacturers who package the  The Organic Price Differential: a fi nancial incentive paid to producers product for the consumer are required to ensure traceability of some Fairtrade products such as cocoa and coffee to cover the of ingredients in products that carry the Fairtrade Label. additional costs of certifi ed Organic production and to encourage the There are established processes for dealing with any use of environmentally friendly practices. non-compliances found through the certifi cation and

CCT, East Timor, Courtesy CCT monitoring system which range from corrective action orders, suspensions or decertifi cation. For more information on the principles and processes of Fairtrade Certifi cation, see our information sheet available at: www.fairtrade.org.nz/Producersandimpacts Any questions or concerns about Fairtrade Certifi cation can be directed to [email protected] THE NEW ZEALAND FAIRTRADE MARKET: A MARKET IN GROWTH The New Zealand Fairtrade market has experienced very healthy and sustained growth since its beginnings in 2004. FAIRTRADE RETAIL SALES AND NUMBER OF FAIRTRADE LICENSED COMPANIES IN NEW ZEALAND BETWEEN 2004 AND 2009 Initially nine companies were involved in selling Fairtrade coffee and tea. Retail sales reached NZ$261,050 in 2004. 20,000,000 60

By 2009, the number of New Zealand companies licensed to Number of Fairtrade Licensed Companies sell Fairtrade products increased to 51. Their combined retail 50 sales topped NZ$17.5 million. Fairtrade products currently 15,000,000 available in New Zealand are: coffee, tea, chocolate, cocoa, 40 bananas and cotton. This growth in Fairtrade retail sales is great news for

NZ$ 10,000,000 30 small-scale farmers and workers in developing countries. Increased Fairtrade sales means that more trade is taking place under Fairtrade conditions and that more farmers 20 and workers are receiving the economic, social and 5,000,000 environmental benefi ts of Fairtrade. 10 While the market for Fairtrade in New Zealand is still relatively small, the move towards the purchase of ethical 00 2004 2005 2006 2007 2008 2009 products is a worldwide phenomenon. The global Fairtrade market grew by 22% in 2008. New Zealand Fairtrade market growth over the same period was 69%. The New Zealand Retail sales* *All Fairtrade retail sales for Australia and New Zealand are estimates based on wholesales fi gures reported to Fairtrade Labelling Australia and Number of Fairtrade market will continue to grow strongly. New Zealand (FLANZ). Reported wholesale fi gures are conservatively Fairtrade businesses marked up by 30% to refl ect the total value of Fairtrade retail sales.

CoopeAgri, Costa Rica A FAIR PRICE FOR COFFEE FARMERS Fairtrade: A Safety Net for Coffee Farmers The price received for Arabica coffee has fl uctuated wildly over the CoopeAgri was created in 1962 and is based in San Isidro de last 20 years. For 15 of those years the market price for Arabica coffee Pérez Zeledón in Costa Rica. (as measured by the New York coffee exchange, the New York “C” market) has been below the Fairtrade Minimum Price. CoopeAgri uses some of its Fairtrade Premium to invest in their Fairtrade Coffee Nursery. Between 2001 and 2004 at the height In 2001 the Arabica coffee market price reached an all-time low of of the most recent coffee crisis many non-Fairtrade farmers NZ$1.43/kg. As outlined in the report by Oxfam International, Mugged: abandoned their fi elds and subsequently were unable to Poverty in your Coffee Cup, in 2002, this was economically unviable for reinvest in coffee plants. The coffee nursery project is offering many farmers and resulted in their children being removed from school, farmers the opportunity to renew their production. It is also an inability to access healthcare and family disruption as adults left their providing new plants to replace aging and damaged plants. communities to fi nd alternative work. [Coffee plants’ productivity cycle is about 20 years.] In 2001 Fairtrade Certifi ed Arabica coffee farmers were spared the market During 2008, the nursery provided 240,720 plants to coffee farmers. low because their incomes were protected by the Fairtrade Minimum Price “During the international coffee crisis hundreds of coffee which was NZ$3.85/kg at that time. This meant their income was more than growers abandoned their fi elds, nearly 20% of all growers. double the income of non-Fairtrade farmers. The Fairtrade Minimum Price Today, with the Fairtrade Premium being invested in a coffee acts as a fl oor price to protect farmers from unsustainable downturns in the plant nursery farmers have been given another chance of market. Whenever the market price is above the Fairtrade Minimum Price, staying in the activity they inherited from their parents.” Fairtrade producer organisations receive the market price for their produce. Victor Hidalgo, CoopeAgri coffee grower

THE ARABICA COFFEE MARKET 1989-2009: COMPARISON OF FAIRTRADE AND NEW YORK PRICES © Fairtrade Foundation 320.00 Frost Damage in Brazil 1994 280.00 Drought in Brazil 240.00 February 2008 10-year high of 164.40 cents 200.00 (‘tightness’ of coffee supply) Collapse of International Drought in Brazil Coffee Agreement 1989 160.00 FAIRTRADE PRICE US cents/lb 120.00

80.00 Autumn 2008 NEW YORK PRICE October 2001 coffee and other commodity 40.00 30-year low of 45 cents prices depressed by 0 (oversupply of coffee) global fi nancial crisis Oct 1989 Sept 1992 Aug 1994 May 1997 Dec 1999 Nov 2002 Sept 2005 Jan 2009 the entirecommunity. families areconsiderablyimprovedovertimewithbenefi working andlivingconditionsoftheproducers,workerstheir infrastructure projects.ThankstotheFairtradePremiumsocial, to increaseincome,small-scaleincomediversifi farm improvementstoincreaseyieldandquality, processingfacilities The FairtradePremiumistypicallyinvestedineducationandhealthcare, and theirfamiliestotacklepovertythroughthebenefi have autonomyonhowthisisinvested,therebyempoweringproducers the Premiumisfi a vitalcomponentofhowFairtradeempowersfarmersandworkers.While Local decisionmakingonhowbesttoachievecommunitydevelopmentis are madebytheproducerorganisationthroughitsdemocraticprocesses. development projects.DecisionsabouthowtheFairtradePremiumisspent Fairtrade Priceforinvestmentinsocial,environmentalandeconomic The FairtradePremiumisasumofmoneypaidontoptheagreed FOR DEVELOPMENT THE FAIRTRADE PREMIUM—ANOPPORTUNITY NZ$1.76 moreperkilogramofcoffeethantheFairtradeMinimumPrice. the HighlandOrganicAgricultureCooperativeinPapuaNewGuineaupto Fairtrade MinimumPrice.ForinstanceNewZealandtradershavepaid Economic Benefi The FairtradeEconomicBenefi NZ$3.86/kg. Price forArabicacoffeeincreasedon1stJune2008toNZ$3.97/kgupfrom [up fromNZ$0.48/kgtoNZ$0.64/kg].AdditionallytheFairtradeMinimum [up fromNZ$0.16/kgtoNZ$0.32/kg]andtheOrganicPriceDifferential together withanincreaseasof1June2007totheFairtradePremium 2009. ThiswasduetocontinuinglargeincreasesinFairtradecoffeesales signifi selling FairtradecoffeetotheNewZealandmarkethasincreased The directFairtradeEconomicBenefi include EastTimor, PapuaNewGuinea,Ethiopia, Tanzania andPeru. countries inAfrica,Asia,Asia-Pacifi Fairtrade Certifi in NewZealandand87%oftheArabicacoffeewasalsocertifi In 2009ArabicaFairtradecoffeeaccountedfor92%ofall purchased Fairtradeproduct.In2009coffeemadeup90%ofretailsales. the NewZealandmarket,FairtradeCertifi Although weareseeingagrowingvarietyofFairtradeproductsin FAIRTRADE COFFEE—PROVIDINGECONOMICBENEFITSTOFARMERS futures contract atICEFuturesUS(NewYork BoardofTrade) . The NYpriceisthedailyclosing priceofthesecondpositionCoffee‘C’ **Premium wasincreasedfrom US5cents/lbon1June2007. *Minimum Pricewasincreased fromUS121cents/lbon1June2008. US125 centsorabove,theFairtradeprice=NewYork price+US10cents. US10 cents/lbFairtradePremium**.WhentheNewYork priceis Fairtrade price=MinimumPrice*ofUS125cents/lb + cantly especially since 2007 to reach just over NZ$1.1 million in cantly especiallysince2007toreachjustoverNZ$1.1millionin ed coffee in New Zealand originates from 12 different ed coffeeinNewZealandoriginatesfrom12different xed by the Fairtrade Standards, producer organisations xed bytheFairtradeStandards,producerorganisations t per kilogram. Often Fairtrade traders will pay above the t perkilogram.OftenFairtradetraderswillpayabovethe t graphsrefl c and Latin America. These countries c andLatinAmerica.Thesecountries t accruing to producer organisations t accruingtoproducerorganisations ed coffee remains the most ed coffeeremainsthemost ect onlythe cation schemes and cation schemesand ts of trade. ts oftrade. minimum ts extending to ts extending to ed Organic. Fairtrade Fairtrade “With the extra income from the coffee we have built a “With theextraincomefrom coffeewehavebuilta “With theextraincomefrom coffeewehavebuilta able topayschoolfeesfortheir children.” able topayschoolfeesfortheir children.” The Fairtrade Premium has funded the building of three The FairtradePremiumhasfundedthebuildingofthree The FairtradePremiumhasfundedthebuildingofthree school and given a dividend to our members who are now school andgivenadividendto ourmemberswhoarenow school andgivenadividendto ourmemberswhoarenow OCFCU isthelargestFairtradeCertifi OCFCU isthelargestFairtradeCertifi coffee growers and approximately 15 million households coffee growersandapproximately15millionhouseholds coffee growersandapproximately15millionhouseholds Schools fromFairtrade School PrograminYirgacheffe experienced strong growth since 2005, which has increased experienced stronggrowthsince2005,whichhasincreased experienced stronggrowthsince2005,whichhasincreased export theircoffeedirectlytothespecialtymarket.OCFCU’s export theircoffeedirectlytothespecialtymarket.OCFCU’s dependent on coffee for their livelihoods. Coffee accounts dependent oncoffeefortheirlivelihoods.Coffeeaccounts dependent oncoffeefortheirlivelihoods.Coffeeaccounts Ethiopia, the birthplace of coffee, has more than 1.2 million Ethiopia, thebirthplaceofcoffee,hasmorethan1.2million Ethiopia, thebirthplaceofcoffee,hasmorethan1.2million primary schools in Bebo, Ragol and Bogi villages. More primary schoolsinBebo,RagolandBogivillages.More primary schoolsinBebo,RagolandBogivillages.More Oromia CoffeeFarmersCooperativeUnion(OCFCU),Ethiopia Oromia CoffeeFarmersCooperativeUnion(OCFCU),Ethiopia Fairtrade coffee sales to Australia and New Zealand have Fairtrade coffeesalestoAustraliaandNewZealandhave Fairtrade coffeesalestoAustraliaandNewZealandhave Dulecha Gobena,Chairman, KilensoResaCooperative,Yirgacheffe Dulecha Gobena,Chairman, KilensoResaCooperative,Yirgacheffe than 80%ofOCFCU’s FairtradePremiumfundsin2008were than 80%ofOCFCU’s FairtradePremiumfundsin2008were their totalFairtradeEconomicBenefi their totalFairtradeEconomicBenefi is an ongoing project. is anongoingproject. is anongoingproject. invested inschoolprojects,and investmentinlocalschools invested inschoolprojects,and investmentinlocalschools in Ethiopia. It was founded in 1999 when 23,691 members in Ethiopia.Itwasfounded1999when23,691members in Ethiopia.Itwasfounded1999when23,691members from 35 small Ethiopian cooperatives came together to from 35smallEthiopiancooperativescametogetherto from 35smallEthiopiancooperativescametogetherto for morethanhalfofEthiopia’s exportearnings. for morethanhalfofEthiopia’s exportearnings. NZ$ 1,000,000 1,200,000 Fairtrade Premium Organic PriceDifferential Fairtrade PriceBenefi 200,000 400,000 600,000 800,000 0 0420 0620 082009 2008 2007 2006 2005 2004 FAIRTRADE COFFEEIMPORTSTONEWZEALAND t FAIRTRADE ECONOMICBENEFITFROM Differential plustheFairtradePremium. New York “C’”marketprice,plustheOrganicPrice between theFairtradeMinimumPriceand Fairtrade PriceBenefi The FairtradeEconomicBenefi ed coffee organisation ed coffee organisation ed coffee organisation t. t. t. OCFCU, Ethiopia,CourtesyJasperCoffee t, whichisthedifference t isthesumof Highland Organic Agriculture Cooperative (HOAC), Papua New Guinea Fairtrade and Infrastructure Development Coffee is the number one cash crop in the highlands of Papua New Guinea. More than 2 million people (40% of the country’s total population) depend directly or indirectly on money earned from coffee to cover basic living expenses such as food, children’s school fees, clothing and medicines. The 2,604 members of HOAC live in the remote highlands area where they grow Organic and Fairtrade Certifi ed coffee. Their coffee has been available in New Zealand since 2005 and has enjoyed growing support from the New Zealand consumer. One of the major concerns for the Fairtrade growers and the local communities in this area is poor road access, making it diffi cult for them to trade their produce. The roads are in terrible condition and even tractors can end up with broken axles from the trip. To address this problem a proportion of HOAC’s Fairtrade Premium is allocated to the improvement of the local roads. The improvement in the road network has created a business bonanza for small coffee farmers, and permitted better access to education and health services for locals. “Fairtrade has shown us that, through our own efforts, development can come to our area.“ Eno Nosare, HOAC farmer

HOAC, PNG, Courtesy Maria Trogolo

FAIRTRADE IN THE ASIA-PACIFIC REGION FURTHER BENEFITS FOR PRODUCER The Asia-Pacifi c region has historically been under-represented in ORGANISATIONS AND THEIR COMMUNITIES the international Fairtrade market. Australia and New Zealand are in Reviews of the academic literature and external impact a unique position to provide assistance to their Asia-Pacifi c neighbours assessment by the Fairtrade Labelling system show that and open up the market for their Fairtrade products. The Fairtrade the benefi ts of Fairtrade go beyond a simple economic Labelling network has increased markedly its engagement in the region transaction. Fairtrade means buyers and producers building over the last fi ve years. long term partnerships that provide sustainable livelihoods Fairtrade Labelling Australia and New Zealand is assisting Fairtrade for farmers, workers and their families. producers in the region to develop trading relationships with Australia Other direct impacts for farmers include: and New Zealand. FLO and FLO-CERT are both increasing their staff in the region in response to a growing number of Fairtrade Certifi ed producers  increases in family income, security of income and and applicants. Since 2004 the number of Fairtrade Certifi ed producers food availability; in the region has increased by 276% and new applications are growing  investment in production infrastructure and processes to strongly. improve product quality and capture a share of the value Similarly the number of available Fairtrade Certifi ed products in the added opportunities for Fairtrade products; and Asia-Pacifi c region has increased three-fold, from six product categories  access to potential export partners and market to 18, and now includes products such as coffee, tea, sugar, cotton, information. exotic fruit, herbs, spices, fl owers, plants, nuts, oils, rice, juice, and soy products with more awaiting certifi cation such as vanilla and honey. Indirect impacts can be wide ranging and are also felt within the wider community and local economy. According to Fairtrade coffee imports to New Zealand originating from the recent evidence some of these include: Asia-Pacifi c region have grown by more than 2600% from 10,892kg in 2004 to 284,400kg in 2009. This has resulted in a total Fairtrade Economic  local market prices tend to better refl ect a fair price; Benefi t of NZ$852,800 over the 2004 to 2009 period from Fairtrade sales in  farmers’ confi dence, empowerment and skills increase; New Zealand.  education and training opportunities in the area have improved;  environmental farming practices have improved; and  a range of conservation projects have been developed, including turtle conservation and the maintenance of traditional cultural methods. Cooperativa Cafe Timor (CCT), East Timor Fairtrade and Healthcare: Clinic Cafe Timor In 2000, a group of farmers united to form CCT. Today, the organisation has 23,000 members from 16 base cooperatives and 494 small-scale farmer groups. The Clinic Café Timor initiative, a development program within CCT, demonstrates the benefi ts to disadvantaged communities from Fairtrade. Healthcare services in rural East Timor are often diffi cult to access and not easily affordable for farmers and their families. As a response to this, CCT has allocated a susbstantial part of their Fairtrade Premium to healthcare. Clinic Café Timor offers primary level healthcare services to 115,000 coffee farmers and their families in the rural coffee growing districts of East Timor. “With the Fairtrade Premium, the co-op has invested in a healthcare program that handles more than 18,000 cases each month. Its facilities include 10 fi xed clinics and 24 mobile clinics that provide free services to coffee farmers and their families.”

Sam Filiaci, advisor to CCT, East Timor Clinic Cafe Timor is the largest provider of rural health care in East Timor. “I know the Fairtrade income that my colleagues and I generate through our sales of fresh, organic Arabica cherries is used to buy medicine for the Cooperativa Café Timor’s primary healthcare clinics. For that I am very grateful, as the clinic’s staff saved my wife’s life during the recent birth of my child.” Alfonso Sarmento, CCT member

CCT, East Timor, Courtesy CCT

This report and accompanying profi les of producer organsiations can be found at www.fairtrade.com.au/Producersandimpacts and www.oxfam.org.nz/fairtrade.

Fairtrade Labelling Organisation International (FLO) also publishes regular information on the impact of Fairtrade Certifi cation and Labelling at www.fairtrade.net/impact.html.

Queries on the content of this report can be addressed to Fairtrade Labelling Australia and New Zealand via [email protected].

REFERENCES Exchange rates: A single average was calculated for the period 2004 to 2009 using This report is compiled from the global resources of the Fairtrade monthly averages from the New Zealand Reserve Bank. Labelling movement including specifi cally the following: www.fairtrade.net NZ$1 = US$0.68 www.fl o-cert.net www.fairtrade.org.uk For more information on the topics below visit the links: www.transfairusa.org Fairtrade Minimum Price: www.fairtrade.net/list.html?&no_cache=1 Other sources include: FLO certifi cation process: www.fl o-cert.net/fl o-cert/main.php?id=82 www.hdr.undp.org/en/statistics/dev.ico.org/prices/p2.mht Arabica graph 1989-2008: www.fairtrade.net/fi leadmin/user_upload/content/2009/ www.news.bbc.co.uk products/Arabica_Price_Chart_89-08.pdf www.hdrstats.undp.org Oxfam International report Mugged: Poverty in your Coffee Cup, 2002: www.rbnz.govt.nz www.maketradefair.com/assets/english/mugged.pdf Further resources for case studies: Fairtrade impact studies: This report includes fi ndings from forthcoming research www.jaspercoffee.com to be published by the Fairtrade Foundation (www.fairtrade.org.uk) and Fairtrade www.coffeeconnections.biz Labelling Organisations International (www.fairtrade.net). www.globalcafedirect.com.au “ www.worldpulse.com/magazine/articles/coffee-groundswell

Front page image: Kuapa Kokoo, Ghana. Courtesy of www.fairtrade.net, Jennifer Stapper.