Fair Trade Coffee Benefits Retailers More Than Farmers?

Does Fair Trade certification benefit farmers? Fair Trade coffee is significantly more expensive, but how much of the added cost trickles down to the farmers/producers? Apparently retailers are taking advantage of consumers' lack of price sensitivity. Consumers are most likely assuming that the higher price benefits farmers. It does, up to a point. From the NYTimes:

Fair Trade labels don't list the amount paid to farmers; that sum requires research. The amount can vary depending on the commodity. An analysis using information from TransFair shows that cocoa farmers get 3 cents of the $3.49 spent on a 3.5-ounce chocolate bar labeled "organic fair trade" sold at Target. Farmers receive 24 cents for a one-pound bag of fair trade sugar sold at Whole Foods for $3.79.

The coffee farmer who produced the one-pound bag of coffee purchased by Mr. Terman received $1.26, higher than the commodity rate of $1.10. But whether Mr. Terman paid $10 or $6 for that fair trade coffee, the farmer gets the same $1.26.

"There is no reason why fair trade should cost astronomically more than traditional products," Nicole Chettero, a spokeswoman for TransFair USA, said. "We truly believe that the market will work itself out as Fair Trade certified products move from being a niche market to a mainstream option. As the demand and volume of Fair Trade certified products increase, retailers will naturally start to drop prices to remain competitive."

In Europe, where fair trade is more pervasive, some critics complain that retailers have taken advantage of consumers who are not price-sensitive. At one point, Britain's largest chain of coffee shops, Costa Coffee, added 18 cents to the price of a cup of cappuccino brewed from fair trade coffee. Yet the coffee cost the chain just one or two cents extra, according to research by Tim Harford, author of the book "The Undercover Economist." The chain has since reduced its price for the drink.

"Fair trade products make a promise that the producers will get a good deal," Mr. Harford said. "They do not promise that the consumer will get a good deal. That's down to you as a savvy shopper. You can find out how much farmers are getting and reward retailers who don't try to charge you something on top."

... In some cases, the individual farmers may receive less than fair trade rules require because the money goes to cooperatives, which have their own directors who decide how much to pass on to farmers.

"We did a breakdown and saw that sometimes, what they're paying farmers is only 70 cents to 80 cents a pound" for coffee instead of the entire fair trade price of $1.26, said Christy Thorns, a buyer at Allegro Coffee, a roaster in Thornton, Colo., that is owned by Whole Foods. "There are so many layers involved."

Transfair, she said, doesn't "clearly communicate that to consumers."

... SHOPPING activism in the United States has helped funnel $67 million to fair trade farmers and farm workers throughout Latin America, Africa and Asia since 1999, according to TransFair. Without fair trade, supporters say, some farmers have no access to market information and can often be duped into selling to middlemen at below-market prices or, if prices fall, can be forced to quit farming.

Ms. Chettero acknowledges the fair trade system is not perfect but said it is a step toward farmers improving their lives. If not for consumers and the fair trade system, she said, "Who else is going to do it?"