Ethical, sustainable, and fair language is plastered across most coffee websites, packaging, and social media. It sounds great, right? However, consumers want to feel that they are conscious and doing right by farmers when they purchase coffee.
The problem is the economics of coffee aren’t as rosy as the buzzwords imply. Underneath the marketing language, poverty in the Coffee lands is an enduring crisis–one that producers have struggled with for generations. There is substantial evidence that systematically low prices are the predominant root cause of poverty and a critical barrier to livelihood advancement. For years, the call to pay higher and fairer prices has been reverberating in the background of the $200-$250B coffee industry. Yet, even with occasional price spikes in the C-market, there is still a huge discrepancy in how we price specialty coffee.
The unsustainably low prices farmers are paid exist alongside volatility from coffee leaf rust, incessant market fluctuations, the omnipresent effects of climate change, mounting investment needs, a growing shortage of farmworkers; and increasing opportunity costs that are forcing droves of farmers to seek other work altogether, often in other countries.
Despite an immense amount of resources being funneled into origin and many claims around “ethical” sourcing, the results that we’ve seen of economic programs are lackluster. Paying a more equitable price for coffee is not just the ethical thing to do—it’s key to the future of a thriving, sustainable, and diverse coffee industry.
To create a new pricing model designed to promote living wages for farmers, Bellwether Coffee, Heifer International, and Sustainable Harvest partnered together to create Verified Living Income (VLI). VLI is a new initiative focused on developing a genuinely transparent, economically viable method of determining how much to pay for green coffee based on the cost of production and a living wage for the farmers who grew it.
Here’s how it works: data on the cost of production, land size, and farm productivity is collected with the help of stakeholders throughout the supply chain, then overlaid with the local Living Income Benchmark to identify the minimum price that should be paid for green coffee to achieve a price that enables producers to thrive, not just survive.
The inputs for the Living Income Benchmark include:
- Nutritious, culturally-appropriate diet
- Decent housing based on local needs and expectations
- The cost of other basic needs, like healthcare, transportation, clothing, and education
- Minimum savings to withstand unexpected shocks and expenses
Verified Living Income provides producers the agency to participate in the price-setting process. Unfortunately, the power dynamics of most buyer-producer relationships leave coffee farmers as “price takers” and buyers as “price setters.” This unbalanced dynamic is a crucial driver of instability because it leaves many producers worldwide vulnerable to hardship and discourages younger generations from investing in the industry. By partnering with producers to collect necessary data on the costs of production, farmers can expand their business acumen, learn to collect, and use financial data, and take ownership over their businesses in new ways that will empower them for years to come.
Until all green coffee buying starts with living income as the baseline for pricing—rather than the C-market or other global minimums—the imbalance of value in the coffee chain will not be corrected.
Producer livelihoods must be the starting point for green coffee prices to create a more fair and sustainable industry. Buyers can no longer be “price setters” and producers “price takers.” This will require cooperation from stakeholders at every level of the value chain—and it can be done.