254. CRS comment on FTUSA’s Independent Smallholder Standard

Today we sent Fair Trade USA some comments on its proposed Independent Smallholder Standard.  The comments include contributions from CRS experts in the areas of Fair Trade, coffee, agriculture, smallholder trade, environmental sustainability and labor rights.  They were drafted in a spirit of constructive criticism, and in the hope of improving the Standard and its impacts on smallholder coffee farmers.

The full CRS document is available here.  In my introduction to the document below, I explain why

…we greeted the FT4All vision with a mix of concern for its potential to undermine the well-being of smallholder cooperatives already Fair Trade Certified, and optimism for its potential to create new market opportunities for smallholder farmers that have not been served by cooperatives and remain excluded from the Fair Trade marketplace.

CRS has been working at origin since 2003 to help smallholder coffee farmers build market relationships that are fair and sustainable.  Support for direct, Fair Trade relationships – both certified and uncertified – has been an important part of that work from the outset.  In some cases, this has meant helping form new cooperatives among farmers who sought and earned Fair Trade Certification.  In other cases, it has meant helping existing cooperatives achieve certification.  And in others, it has involved additional investments in Fair Trade Certified cooperatives to help them compete more effectively in specialty coffee markets.

ACORDAR, an ongoing value-chain project in Nicaragua, and CAFE Livelihoods, a recently completed four-country coffee value chain project in Mexico and Central America, are two leading examples of how our project support and Fair Trade Certification combined to expand market opportunities for hard-working smallholder farmers.  Both projects involved partnerships with smallholder cooperatives with relatively high levels of capacity.

But in other parts of the world, smallholder farmers are not as well or widely served by cooperatives.  Consider this excerpt from a report on a CRS project in Ethiopia funded by the Gates Foundation:

Smallholder development projects tend to work through organized cooperatives.  In the case of Ethiopian beans, however, most farmers must sell through informal trade channels because farmer cooperative management is weak, and because cooperatives have insufficient capital to buy the crop. In Africa, and in much of the developing world, poor farmers similarly do not have access to effective cooperatives.

Our experience has shown us that in some cases, investments to improve cooperative management or expand access to trade finance can help coops overcome barriers to competitiveness like those mentioned here.  In some cases, however, cooperatives simply fail to thrive.  The reasons may vary.  The bottom line, however, is that coops don’t work when farmers perceive the costs of formal organization – either in terms of cash contributions, time, risk in contexts where organization is a politically freighted endeavor, etc. – exceed the expected value – as measured by increased incomes, access to services, information and markets, etc.

In these contexts, CRS often finds itself working with smallholder farmers to co-create alternative forms of organization for the marketplace.  The report cited above goes on to describe the project’s efforts to organize smallholder bean farmers in Ethiopia into “virtual cooperatives” – farmer organizations with a lighter footprint and lower organizational burden than formal associations or cooperatives that still deliver tangible benefits to smallholder farmers.

This can be lonely work.  Many private-sector firms are interested in expanding their smallholder sourcing operations – Walmart has famously committed to source $1 billion in food from 1 million smallholder farmers by 2015 – but few are willing to assume the costs and risks associated with the innovations in smallholder organization necessary to help achieve such scale.

Against this backdrop, we greeted the FT4All vision with a mix of concern for its potential to undermine the well-being of smallholder cooperatives already Fair Trade Certified, and optimism for its potential to create new market opportunities for smallholder farmers that have not been served by cooperatives and remain excluded from the Fair Trade marketplace.  With the draft Independent Smallholder Standard in hand, we are able to more accurately assess its likely impacts.