Final thoughts (for now) on Direct Trade
There is one other issue that did not come up in last week’s great discussion here on Direct Trade that is probably worthy of mention: the price paid to smallholder farmer organizations under different trading models.
I debated whether to publish this post at all because I am reluctant to be part of the reductionist tendency to focus primordially on the issue of price when evaluating a trading model. There are so many benefits to the prevailing approaches to “sustainable” coffees that are not related to price that get ignored by this unidimensional focus. But precisely because price is such a focal point in these comparisons, I think it is important to address a few sources of confusion.
One of the points most commonly raised by Direct Trade’s advocates is that the prices paid by Direct Trade roasters are higher than Fair Trade prices. Each of the three Direct Trade roasters I focused on last week compares its own prices with Fair Trade prices:
- Counter Culture Coffee’s Direct Trade Certified pays a minimum of $1.60 per pound — a price that “exceeds the Fair Trade Certified floor price by 19 percent.”
- Intelligentsia Direct Trade doesn’t specify its minimum price but states that it is “at least 25 percent above the Fair Trade price.”
- Stumptown Direct Trade reports that “the bottom line Direct Trade offering over the past year was 21 percent above the Fair Trade minimum.”
These are favorable comparisons, to be certain. But comparisons with one another — and with Fair Trade — are complicated by the way these comparisons are made.
TERMS OF PAYMENT.
Intelligentstia and Stumptown both provide important — an impressive — detail in terms of the recipient of these generous payments. Intelligentsia makes its payments “to the grower or the local coop, not simply the exporter,” while Stumptown “guarantees that price goes direct to the farmer.” This is an important distinction from the Fair Trade system, in which contracts are drawn up with cooperatives, which receive payment and disburse it to their members after backing out operational costs and the social premium. Counter Culture does not make clear who receives its minimum payment of $1.60.
AVERAGE v MINIMUM PAYMENTS
Counter Culture and Intelligenstia both refer to their respective guaranteed minimum price, while Stumptown refers to its average price. If Counter Culture and Intelligentsia were to follow Stumptown’s lead, their own comparisons (19 and 25 percent, respectively) would look more favorable than they do now.
“FAIR TRADE PRICE”
This is the biggest problem with the comparisons between Direct Trade and Fair Trade prices. Actually, there are two problems here. The first problem is that only that Counter Culture makes the explicit — and coherent — comparison bewteen its guaranteed minimum price and the “Fair Trade Certified floor price.” Stumptown compares its average price to the Fair Trade minimum. Intelligentsia makes reference to the “Fair Trade price,” implying that there is a standard Fair Trade price and leaving the casual observer uncertain about the point of comparison.
The second problem — related to the first — is more significant: there are lots of Fair Trade roasters out there who for years have been paying prices that far exceed the floor price guaranteed under Fair Trade Certification. (One pioneering Fair Trade roaster recently told me he can’t remember the last time he paid less than $2 for a pound of coffee.) So while each of these Direct Trade roasters may compare favorably with the Fair Trade Certification “system”, we don’t know how they compare with specific roasters within the Fair Trade system who happen to pay significant premiums. Unfortunately, the (inaccurate) conclusion many consumers draw from these comparisons is that “Direct Trade roasters pay higher prices than Fair Trade roasters.”
I do not mean for a moment to attribute this intent to the roasters mentioned here, but I do see it as a common and unfortunate misreading of Direct Trade pricing systems.