Wednesday, April 18, 2012

A Study on the Economics and Sustainability of 'Fair Trade' and 'Organic' Certification

Fair Trade Coffee from Haiti
I a firm and unwavering supporter of fair trade.  The scheme allows growers to receive a fair return for their products, whether it's coffee, cocoa, textiles or handicrafts.   I also support the concept of organic production, which reduces reliance on harmful herbicides and pesticides.

Both the fair trade and organic schemes must go through the certification process to ensure that these practices are indeed being followed.  This certification is conducted to reassure the consumer in the U.S. or Europe.  But what about the growers? Are there other factors besides increased income that play into their agricultural decisions?

Brad Barham,a professor of agricultural and applied economics at the University of Wisconsin, conducted a study among coffee growers in Peru and southern Mexico to determine the economic effects and sustainability of certification.  Prof Barham, who is co-director of the Program on Agricultural Technology studies at UW, will present the results of his studies here at the University of New Mexico this coming Friday.  Here are the details:

The Economic Effects and Sustainability of Certified
Coffee Schemes:
Evidence from Mexico and Peru

Brad Barham Professor, Agricultural and Applied Economics Co-Director, Program on Agricultural Technology Studies University of Wisconsin, Madison 

Friday, April 20, 2012 Economics, Room 1052
2:30-3:30 p.m.  
Coffee will be served 

You probably want to know more about the study before you attend.  Here is a synopsis from ScienceDirect com of a piece that Prof. Barkham co-wrote with Jeremy Weber of the U.S. Department of Agriculture's Economic Research Service.
Representative grower data from Mexico and Peru, two global leaders in certified coffee, show that yields rather than price premiums are most important for increasing net cash returns for coffee growers. To the extent that any existing certification norm limits yield improvements, they may create “traps” for marginal low intensity growers, especially if price premiums are small and decrease over time with more competition. By contrast, to the extent that enhancing yields and productivity is critical to the well-being of coffee growing households, any “sustainability” initiative must consider embracing advances in geographically appropriate best management practices. We close by considering the implications of the limits of our current knowledge on what is “sustainable” to advancing the dialogue on what comes next for certification schemes.
And from a discussion in Economics Applied..
Coffee growers must earn competitive returns from participating in certification programs, which promote principles like environmental stewardship, or participation will decline. While the promise of higher prices for certified coffee often motivates growers to participate initially, are price premiums the main determinant of grower profitability? What are the cost and benefits of organic certification standards that prohibit inorganic fertilizers, in contrast to other standards like that used by Rainforest Alliance. We find that...
  • Yields  (pounds of coffee per acre) are more important for grower profitability than price premiums from selling certified coffee. 
  • One project in Peru increased yields and profitability substantially by teaching growers better practices, like when and how much to fertilizer  and how to systematically prune coffee plants. (Read about efforts by the Peruvian National Coffee board to expand the practices throughout Peru: Propuesta de Incremento de Productividad para la Caficultura Peruana). 
  • The prohibition of inorganic fertilizer by organic standards can, in some areas, limit the yields and returns that growers can earn from coffee. The environmental and health benefits of the prohibition are unclear.
Read more discussion about this issue in Economics Applied
Read  Full Article in ScienceDirect
You probably have a lot of questions and might need some clarification.  If you live in Albuquerque or Santa Fe, here is your opportunity to interact with Prof. Barham.

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