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Cocoa farmers in Ghana and coffee producers in Ethiopia have little benefits from fair trade programmes

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Despite the programme’s objective to benefit  coffee farmers in Ethiopia it has been found that fair trade does not improve the living conditions of farmers, according to a new study by the International Food Policy Research Institute (IFPRI), a press release copied to ghanabusinessnews.com has said.

According to IFPRI, higher price mark ups on Fair Trade or Organic certified coffee are unlikely to significantly contribute to improving the welfare of small farmers in Ethiopia.

In fact, less than one-third of the premium realized by coffee exporters is passed on to the coffee farmers, it noted. 

While coffee exports from Ghana are negligible, in the case of smallholder cocoa farmers, Orla Ryan found in her book “Chocolate Nations”, that they benefit more from government policies than programmes such as fair trade. According to Ryan only a tiny fraction of the cash consumers pay for a chocolate bar actually makes it back to the farmers, and sheds light on what Fair Trade really means on the ground.

Cocoa farmers in Ghana are part of fair trade programmes and the country is the second largest producer of cocoa in the world, after Ivory Coast.

“The low transmission of the premium of Voluntary Sustainability Standards (VSS) models such as Fair Trade or Organic certification to effectively benefit poor farmers is a concern, especially as other development programmes demonstrate greater efficiency in transmitting benefits of programmes towards poverty alleviation. Although some payments towards the certification end up in the producing countries, our findings raise questions on the effectiveness of the VSS model,” said Bart Minten, lead author of the study. 

The study found that at the export level, VSS certification is associated with significant price premiums, however, only one-third of these quality premiums at export level are directly transmitted to coffee farmers. Although a part of the quality premium for producers is used for financing communal investments – which have led to higher school enrollment rates and adoption of improved production practices among certified farmers – the study found limited evidence of large-scale impacts of communal investments. Instead, a much larger share of the premiums is used for overheads and programme management. The study also didn’t find any significant difference between certified and non-certified cooperatives. Most farmers preferred working with cooperatives over private buyers not because they offered higher prices, but due to the advice they received, proximity and dividends, it said.

The study found that even with a perfect transmission scenario in which farmers received the highest premiums possible, these premiums would lead to an increased income of $22 per year for coffee farmers.

“Given this low level of quality premiums, and the low average production levels among these smallholder farmers, even the ideal scenario would result in little impact on the welfare of the average coffee farmer.” If a coffee farmer in Ethiopia, for instance, were to market all 400 kilograms of her red cherries (coffee fruit) as VSS certified, then at the present VSS premium transmission rates, her income would increase by a mere $ 6.7 as compared to a non-certified farmer, the study found. 

The VSS certification, which took off globally in 2000s, guarantees product origin; fair prices to producers; adherence to ethical standards in production and processing; environmental sustainability; and safety and quality safeguards. The coffee sector has stolen the march over others in applying different VSS—Fair Trade, Organic, Rainforest Alliance, Utz Certified, and 4C Code of Conduct. Nearly 18 percent of coffee production was sold as VSS certified in 2015, as compared to 4 percent in 2005, and its share is likely to increase. 

This research was developed using a census of coffee transactions over a nine-year period, a time-series of coffee producer prices over an eight-year period, and a comprehensive representative survey of 1,600 coffee producers; combining quantitative and qualitative information from these surveys with insights from key informant interviews, IFPRI said.

It was conducted in Ethiopia, the biggest coffee producing country in Africa, where coffee exports account for nearly one-fourth of the country’s foreign exchange earnings. The researchers used data related to two kinds of VSS certifications-Fair Trade and Organic, which have the largest share of the market in Ethiopia. 

By Emmanuel K. Dogbevi

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