A few weeks ago the Fairtrade Foundation released a statement confirming the increase in the Fairtrade Minimum Price (FMP) and the Organic Differential for coffee.
Most industry folk use the term ‘minimum price’ in a different way to Fairtrade. Fairtrade use it to mean the FOB price minus the 20 c/lb Fairtrade Premium (FP), which is different to the FOB minimum price which is what most trade/exporters/roasters refer to as the ‘minimum price’. In any case, the following increases have been set out for any coffee contracts agreed upon from the 1st of August 2023:
- FT Arabica Natural > increase of 40 c/lb (26%)
- FT Arabica Washed > increase of 40 c/lb (25%)
- FTO Arabica Washed > increase of 50 c/lb (26%)
- FT Robusta Natural > increase of 19 c/lb (15%)
- FTO Robusta Natural > increase of 29 c/lb (19%)
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.
Given inflation and the rising cost of production, the industry broadly supports the price increases but many were surprised at how quickly the new rules will take effect and many industry players wanted to have a more staggered approach as some fear that this sudden rise may have a negative impact on demand for Fairtrade Coffee.
Right now cooperatives are offering a mixture of coffee priced against the current Fairtrade pricing structure, and also coffee that is priced against the Fairtrade pricing structure that kicks in from August. 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.
We are working closely with cooperatives and roasters who supply and source Fairtrade and Fairtrade Organic coffee to navigate the likely choppy months ahead in a sustainable way both for producers and for roasters. If you would like to speak about this more, please get in touch with the trade team.