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170. What that study really said

2011-05-24 Comments Off on 170. What that study really said

The study on the economic impacts of Fair Trade and organic certifications that appeared in a recent issue of Ecological Economics has prompted some good, informed discussion, but also its share of distortion.  After carefully reading (and re-reading) the study, here is my take on it as someone who works with both certified and non-certified smallholders.  This is less an effort to definitively “set the record straight” (I don’t pretend to have the credentials for that) than a way for me to structure my own thinking about the study’s findings and to begin to integrate them into the decisions we make in our work at origin.

  • THE RESEARCH APPROACH was rigorous.

I did take statistics in graduate school many years ago, but could not keep up with the finer points of the regressions run by the study’s authors.  The key point for me on the research methodology was this: over the past 10 years there has been plenty of qualitative research on the impacts of coffee certifications but without random sampling and statistic analysis.  This study fills that void.  It was based on random sampling, which means it selected participants with similar living conditions at random to ensure that the distribution of outcomes observed is representative of what it would be in the broader population.  And it used treatment and control groups — one group of farmers that is producing certified organic coffee, one that is producing Fair Trade and organic certified coffee and another producing conventional, non-certified coffee.  The research is based on quantitative data collected in 2007 and qualitative data collected in 2007 and 2008 through more than 100 in-depth interview and more than 300 farmer surveys from across the three groups.


These were the guiding questions that drove the research.  Here and throughout I paraphrase the authors’ language in an effort to filter out some of the more technical language without, I hope, distorting the content.

1. What kinds of smallholder farmers opt for organic and Fair Trade/organic certification, and how do they differ from conventional (non-certified) farmers?

Here the study looked at a range of household-level variables that are correlated with quality of life — literacy, family size, employment, land area, etc. — and concluded there was no significant difference for these variables from one group to the next.

2.  How do these three groups compare in terms of coffee income?

3.  How do these three groups compare in terms of current poverty levels and in terms of how their poverty evolved over the past 10 years?

More below on the study’s answers to these two questions.

  • THE HYPOTHESES reflected core assumptions about sustainable coffee.

The study advanced four hypotheses, which happen to be four of the most widely held beliefs in the sustainable coffee movement.  The newsworthiness of the study, from my perspective, is the fact that the authors were able to confirm only one on the basis of their field data.

1. Organic coffee costs less to produce, since farmers spend less on agrochemicals.  (Not confirmed)

The study found that farmers whose coffee is certified organic do spend less cash on inputs, since they are not buying the kinds of expensive industrial agrochemicals that conventional farmers use.  But organic farming is so much more labor intensive than conventional farming that smallholder families have to rely more on hired labor than their conventional-farming neighbors, driving up their production costs.

While the study notes that there is ample room for farmers to increase efficiencies, there is no short-cutting the labor demands of organic agriculture.  This is a structural constraint that had a direct impact on the study’s second jarring conclusion about net coffee incomes.

2a. Farmers earn higher prices for certified coffees.  (Confirmed)

2b.  Farmers selling certified coffees have higher coffee incomes.  (Not confirmed)

The authors presented these two hypotheses together since they are so closely related.  The thinking behind the research approach here is expressed very clearly in this passage, which I think is worth quoting at length:

“Most studies emphasize the higher prices paid in certified markets and deduce that higher prices lead to higher farm income which then reduces poverty.  As net coffee income is not only determined by the price but also by yield levels and production costs, in our opinion this conclusion is premature.”

It turns out that the study’s authors were right to be skeptical.  The prices for certified organic (8 percent) and double-certified FT/O (11 percent) were higher than conventional prices.  But precisely because production costs for organic farming were so much higher than expected, certified farmers did not have higher net coffee incomes than non-certified farmers.

3. Farmers selling certified coffees have lower poverty levels.  (Not confirmed)

The study’s inability to confirm this hypothesis, and its suggestion that farmers with organic and Fair Trade/organic certifications have lost ground relative to their conventional counterparts, are nothing short of staggering.

  • THE MOST IMPORTANT PASSAGE nobody read was this one:

“Per capita net coffee incomes are insufficient to cover basic needs of all coffee producing households.”

In other words, none of the groups — organic, FT/O or conventional — was able to make enough off of coffee alone to feed their families and stay out of poverty.

  • THE BIG IDEA is more investment in competitiveness.

“We conclude that coffee yields, profitability and efficiency need to be increased, as prices for certified coffee cannot compensate for low productivity, land or labor constraints.”

Based on this conclusion, the authors issue the following recommendations.

  • THE RECOMMENDATIONS to governments and donors (and industry).

The authors of the study directed their recommendations to governments and donors, whose agendas have a lot of impact on the ways that smallholder farmers are linked to markets.  But industry is a critical audience as well.  Why?  Because current levels of industry investment at origin and interest in this issue are high.  (Reactions to this story lit up the coffee blogs for days with comments by some of the industry’s thought leaders.)  But more importantly because incentives for action that come from coffee buyers are often much stronger than those that come from donors and governments.

The authors recommend that actors currently supporting certifications:

Shift the focus from certifications to:

  • increased investment at the farm level,
  • improved business management skills,
  • efficient public extension services, and
  • expanded access to finances.