Many farmers and workers around the world live on less than $2/day. Fairtrade fights the trade and power structures that trap producers in cycles of poverty.
Many farmers around the world depend on a single source of income from a cash crop. Some – like coffee, cocoa and cotton farmers – get only one paycheck per year, following the harvest, which they must budget to use on all household expenses, food, school fees, and farm inputs.
Additionally, smallholder farmers often struggle for financing and credit to make ends meet during these times – 2012 survey estimated that 91% of Fairtrade producers had unmet credit needs for short-term farm inputs. Despite credit worthiness, they often are not eligible for long-term loans that would allow them to invest in production improvements on the farm, such as improved equipment or new seedlings.
How Fairtrade Fights Poverty
Fairtrade supports breaking down the systems that trap farmers in cycles of poverty through changing the financial game. The foundation of the Fairtrade system is our approach to price and premium, how we calculate fair payments to farmers.
The Fairtrade Minimum Price applies to most Fairtrade products, and acts as a safety net for farmers and workers when prices fall below a sustainable level. The Minimum Price aims to cover the costs of sustainable production and is established by Fairtrade through an intensive consultation process with producers, traders and other stakeholders, which takes place every five years.
On top of the sale price, Fairtrade producers receive an additional Fairtrade Premium, paid to the producer organization in a lump sum. Members decide democratically on how to spend the money, such as business investments for the organization, education, healthcare, transition to organic production or community services. Neither Fairtrade nor a company they sell to can ever tell the producers how to spend the Premium. Our philosophy is that producers are best placed to know what would be most beneficial for them and their community.
Our Price & Premium Database holds detailed information on all the commodities Fairtrade certifies.
Fairtrade also supports farmers in meeting their needs between harvests though access to finance and credit. Our Trade Standard includes provisions on pre-financing for producers, so they can receive part of their fee in advance from buyers. This supports producers’ well-being between sales.
Check out our Trade Standard here.
Poverty still exists in Fairtrade producer communities. Because the structures that create it are deeply embedded and historic, Fairtrade seeks a path of continuous improvement in collaboration with both producers and companies. A series of living income and living wage studies are helping us identify and close the gap between producers’ below-poverty income and enough to provide for their household needs (food, healthcare, housing) education and farm costs, plus some discretionary spending. In many cases, such as cocoa, the gap is still large. Fairtrade is working to collaborate with companies and consumers to make up the difference, so producers can live healthy and sustainable lives.