People often question how much of what they pay for a Fairtrade product on the shelf goes back to the farmers and workers, and how this amount differs to a product not sold under Fairtrade terms. This may seem like an easy way to explain the impact that Fairtrade has from a consumer’s viewpoint, however it doesn’t get to the core issues and inequalities of the traditional trading systems.
For the farmers and workers we work with, the value of Fairtrade doesn’t lie in the selling price of the product on shelf, but the production costs and market prices. Numerous factors impact and play a part in determining the retail price paid by consumers. Consider the following factors, which must be taken into account by a coffee or cocoa producer selling into the conventional market:
- Shifting market prices – The percentage of what a producer would receive from the sale of a bag of coffee would change, depending on the international price of coffee at the time.
- If they own the farm they work or if they are hired labor on another’s farm.
- If the cooperative does any processing of the cocoa or coffee before selling it on.
- If the cooperative sells to local buyers or at auctions, of if they also act as the exporter of the product.
- The conditions of local trade have significant differences across the world, including whether the industry is independently managed or regulated by governments.
- Costs of production also differ across the world.
Once the Fairtrade commodity is sold to a Fairtrade importer, the following costs are comparable to those for non-Fairtrade products. This includes costs such as transport, insurance, import taxes, processing, packing, storage, distribution, promotion and day-to-day store costs.
Fairtrade does not have any say or power to effect retail costs or product profit margins. When producers are paid fairly up front, rather than after a product, that is the best way to ensure they are receiving a fair deal.