Economic Lessons in Your Morning Mug
A NYT editorial informs us today that retail prices for coffee products are rising (HT: Icarus Fallen). We are assured, however, that the price rise has been “relatively modest” and that an important factor is “changes in supply and demand in a global economy.”
No kidding.
The bad news in the editorial, at least for the fair trade crowd, is that these same forces of suppy and demand are raising the price for the commodity itself.
I have argued previously that the very low price of coffee internationally was a pointer to the fact that we had a global glut in the bean supply.
That trend seems to be reversing and the rising commodity price for coffee is thus undermining the long-term viability, relevance, and credibility of fair trade coffee.
For an opposing perspective, check out Black Gold, a new movie on the fair trade coffee movement, which I have not yet seen (HT: The Advocate).
No kidding.
The bad news in the editorial, at least for the fair trade crowd, is that these same forces of suppy and demand are raising the price for the commodity itself.
According to the International Coffee Organization, the composite price of coffee rose over 36 percent from the beginning of 2005 to the end of 2006. The organization predicts a down year for the Brazilian coffee crop, which could lead to a supply shortfall and even higher prices this year. While world demand has grown at annual rates of 1.5 to 1.8 percent over the last five years, it has been rising at a much faster clip of roughly 15 percent for smaller players like Russia and China. As more people enter the global middle class, the demand for coffee rises, putting upward pressure on the price.
I have argued previously that the very low price of coffee internationally was a pointer to the fact that we had a global glut in the bean supply.
That trend seems to be reversing and the rising commodity price for coffee is thus undermining the long-term viability, relevance, and credibility of fair trade coffee.
For an opposing perspective, check out Black Gold, a new movie on the fair trade coffee movement, which I have not yet seen (HT: The Advocate).
Comments
#1 2007-01-09 08:23 (Reply)
JB,
What (if any) is the link betweek the fair trade and environmental movement? They seem to go hand in hand, but I’m not sure why. Would appreciate any links on the subject.
db
#1.1 2007-01-09 11:21 (Reply)
Don,
There are rather rigorous, sometimes arbitrary, requirements that growers have to meet in order to be fair-trade certified, and a number of these do involve environmental concerns.
The FLO for instance says: “Fairtrade Standards include requirements for environmentally sound agricultural practises. The focus areas are: minimized and safe use of agrochemicals, proper and safe management of waste, maintenance of soil fertility and water resources and no use of genetically modified organisms. However, Fairtrade Standards do not require organic certification as part of its standards. Higher costs for organic production are considered though, by higher Fairtrade Minimum Prices for organically grown products.”
There are more links to PDFs with further information about their cert. practices at the FLO site.
Of course, you needn’t be a fair-trade grower to be concerned about the environment...check out this story about McDonald’s from Marketplace.