标题：The Problem with Fair Trade Coffee
Why do we care about fairly traded coffee? One reason is the importance of coffee to the economies of the countries in which the crop is grown. Coffee is the second most valuable commodity exported from developing countries, petroleum being the first. For many of the world’s least developed countries, such as Honduras, Ethiopia, and Guatemala, coffee exports make up an enormous share of the export earnings, comprising in some cases more than 50 percent of foreign exchange earnings.3 In addition, many of the coffee growers are small and their businesses are financially marginal.
Although some of the world’s poorest countries produce coffee, the preponderance of that production is consumed by the citizens of the world’s wealthiest countries. The United States is the world’s single largest consuming country, buying more than 22 percent of world coffee imports; the combined countries of the European Union import roughly 67 percent, 4 with other countries importing the remaining 10 percent. According to the Specialty Coffee Retailer, an industry resource site, specialty coffee in 2010 accounted for $13.65 billion in sales, one-third of the nation’s $40 billion coffee industry. The Specialty Coffee Association of America reports that approximately 23 million people in the United States drink specialty or gourmet coffee daily. Fair Trade coffee, which has grown steadily from 76,059 pounds in 1998 to 109,795,363 pounds in 2009,5 constitutes only about 4 percent of that $14 billion market.
The primary way in by which FLO and Fair Trade USA attempt to alleviate poverty and jump-start economic development among coffee growers is a mechanism called a price floor, a limit on how low a price can be charged for a product. As of March 2011, FLO fixed a price floor of $1.40 per pound of green coffee beans. FLO also indexes that floor to the New York Coffee Exchange price, so that when prices rise above $1.40 per pound for commodity, or non-specialty, coffee, the Fair Trade price paid is always at least 20 cents per pound higher than the price for commodity coffee.
Commodity coffee is broken into grades, but within each grade the coffee is standardized. This means that beans from one batch are assumed to be identical to those in any other batch. It is a standardized product. Specialty coffee, on the other hand, is sold because of its distinctive flavor characteristics. Because specialty coffees are of a higher grade, they command higher prices. Fair Trade coffee can come in any quality grade, but the coffee is considered part of the specialty coffee market because of its special production requirements and pricing structure. It is these requirements and pricing structure that create a quality problem for Fair Trade coffee.
To understand how the problem arises, one must understand that the low consumer demand for Fair Trade coffee means that not all of a particular farmer’s coffee, which will be of varying quality, may be sold at the Fair Trade price. The rest must be sold on the market at whatever price the quality of the coffee will support.
A simple example illustrates this point. A farmer has two bags of coffee to sell and there is a Fair Trade buyer for only one bag. The farmer knows bag A would be worth $1.70 per pound on the open market because the quality is high and bag B would be worth only $1.20 because the quality is lower. Which should he sell as Fair Trade coffee for the guaranteed price of $1.40? If he sells bag A as Fair Trade, he earns $1.40 (the Fair Trade price) and sells bag B for $1.20 (the market price), equaling $2.60. If he sells bag B as Fair Trade coffee he earns $1.40, and sells bag A at the market price for $1.70, he earns a total of $3.10. To maximize his income, therefore, he will choose to sell his lower quality coffee as Fair Trade coffee. Also, if the farmer knows that his lower quality beans can be sold at $1.40 per pound (provided there is demand), he may decide to increase his income by reallocating his resources to boost the quality of some beans over others. For example, he might stop fertilizing one group of plants and concentrate on improving the quality of the others. Thus the chances increase that the Fair Trade coffee will be of consistently lower quality. This problem is accentuated when the price of coffee rises to 30-year highs, as it has done recently.