19th April 2023
On the 30th of March, Fairtrade released a statement confirming the increase in the Fairtrade Minimum Price and the Organic Differential for coffee.
The following increases have been set out for any coffee contracts agreed upon from the 1st of August 2023:
This price increase is the first since 2011, as a result of a 6 month Coffee Price Review.
The figures were chosen using data from a 2022 Cost of Production study across many producing origins and consultations with different stakeholders across the supply chain. The data is on the Fairtrade website and it’s fascinating to see the large differences between certain countries with regard to their cost of production, and how organic coffee production impacts this. A big takeaway is that the cost of production for organic coffee is much higher than conventional coffee and this needs to be recognised more.
What does this mean in c/lb terms?
For Washed Arabica coffees, currently, the minimum price is $1.40/lb, and if you add the Fairtrade premium of $.20/lb, you get a total of $1.60/lb. If the coffee is Organic, you get the same price plus the Organic premium of $.30/lb, resulting in a total of $1.90/lb.
The minimum price will increase by 26%, reaching $1.80/lb; once the Fairtrade premium of $.20/lb is added, the total will be $2.00/lb; and if the coffee is Organic, $.40/lb will be added as this premium is also increasing, resulting in a total of $2.40/lb.
The minimum price applies if the C Market is $1.80 or lower. If the C Market is higher than $1.80, the contract becomes an “open price” to be fixed, and that’s when differentials or premiums are applied (+$.20 +$.40) on top of the prevailing country or quality differentials.
This price increase is the first since 2011, the result of a 6-month Coffee Price Review. Production costs have increased over the past 12 years; Costs of fertiliser, fuel (including for milling processes), logistics, and labour costs. For organic producers, higher labour needs required to follow organic farming methods contribute to higher production cost. In addition, there are costs to maintain organic certification and meet the organic requirements of importing countries.
Since the announcement, Cooperatives are offering a mixture of coffee priced against the current Fairtrade pricing structure and coffee that is priced against the new Fairtrade pricing structure. We expect increased demand for Fairtrade contracts to be agreed before August and we also expect some cooperatives to hold back offers till then so they can benefit from the higher pricing structure.
Please get in touch with your account manager if you would like any further information on this.
Here are some Q&A’s from Fairtrade: