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What that study means to me

2011 May 25

Yesterday I provided a detailed summary of a recent study on the economic impacts of Fair Trade and organic certifications.  Today, what it means to me in my work.

  • IT IS NOT TIME TO GIVE UP ON CERTIFICATIONS YET, but the study is disheartening.

“Fair Trade means community development is a pretty good risk management tool.”

The 10-year period covered by the study (1997-2007) includes the coffee crisis.  While the study notes that Fair Trade/organic households were better off than their counterparts during that period, it explains that they became relatively poorer as market prices recovered.  The study suggests that Fair Trade Certification has struggled to sustain the clear developmental benefits it generated during periods of low market prices.  With coffee prices higher than anytime in recent memory, advocates of Fair Trade Certification have been busy fending off suggestions that Fair Trade is not relevant anymore.  We have seen unpublished studies, however, that show clearly how the financial return on Fair Trade and other certifications are highest when prices are low and erode as market prices rise.  While protecting smallholder farmers against acute financial distress in times of market collapse is a significant contribution to sustainable trade, it is a long way from the soaring aspirations and rhetoric of Fair Trade.

We have had a sometimes complicated relationship with Fair Trade Certification in our field work, and have wondered in the past whether we might contribute to the same developmental outcomes promoting the principles of Fair Trade without the certification part.  This study may renew those kinds of discussions.  As the study’s authors acknowleged, the results of the study do not necessarily hold outside the area in which it was conducted.  And they recognize the possibility of selection bias in the study’s design.  But the study’s findings are too powerful to ignore.  Too narrow to make any definitive conclusions, but too powerful to ignore.

Organic certification and smallholder farmers.

In the blog debate over this study, some pretty prominent industry voices were unambiguous in expressing their opinion that organic certification is no place for smallholder farmers.

In our work at origin we have definitely seen smallholder farmers struggle mightily to maintain and increase organic yields.  (In the CAFE Livelihoods project I manage, the average baseline yield for conventional was 50 percent higher than for organic.)  We have supported cooperative-run, community-level businesses that sought to achieve economies of scale in 0rganic fertilizer production but only succeeded in meeting 12 percent of the solid fertilizer needs of their members.  And we have seen a steady defection of smallholder farmers from organic certification, especially with market prices as high as they have been.

But there are enough cases of high smallholder productivity and enough evidence of organic certification’s ability to help smallholder farmers mitigate market risk — to say nothing of the ecological benefits — that we haven’t yet reached such a definitive conclusion.

  • MEASURE IMPACT more precisely.

Focus on net coffee income, not revenues.

In some of our coffee work at origin, we have worked with farmers to calculate production costs and net coffee income on a farm-by-farm basis.  In other cases, we haven’t, resting like so many others on the assumption that revenue and income mostly move together.  No more making that mistake.

  • FINDING SOME VALIDATION in the study’s recommendations.

Building better grassroots businesses.

Finally, the core recommendations of the study seem to validate in some sense what we are doing at origin, the lessons we have learned, and the new directions we are proposing to take our coffee work into the future.  Mostly, these revolve around continuing to help farmers and farmer organizations more efficient at what they do, but to begin refocusing our sights at a higher level.

The average yields for farmers participating at the baseline of our CAFE Livelihoods project in Mesoamerica was about 750 pounds of green coffee per hectare — half what we think it needs to be to begin to qualify as economically sustainable.  Coffee trees are old, farms have low plant densities and there is plenty of room for improvement in husbandry.  It is feasible to talk about doubling or even tripling productivity in many cases in Central America.  We have invested significantly in finance for renovation and expanding access to qualified extension services to improve farm management, and yields are increasing in the areas where we are working.   And we have partnered with Root Capital to help farmer organizations improve their business management capacity, to good effect.  But there are only 7000 farmers participating in CAFE Livelihoods.

We plan to continue to work in the field to help facilitate the direct provision of these services to a limited number of farmers.  But we recognize that to contribute to performance improvements like this on a systemic level, we need to complement our muddy-boots work in the field with a more refined, structural focus on influencing both public policy decisions (government and donors) and private sector practices (industry).

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