A large and growing body of impact research is clearly demonstrating the long-term value to producers through their association with Fairtrade:
- Higher returns and stable incomes
- Investing the Fairtrade premium in strengthening businesses and social assets (health, education, infrastructure)
- Access to credit and pre-finance
- Long term contracts and trading relationships
- Improved terms and conditions for workers
- Increased empowerment
- Stronger environmental management.
Fairtrade minimum price
The Fairtrade minimum price is the minimum price that a buyer of Fairtrade products has to pay to a producer organisation for their product. It is not a fixed price, but should be seen as the lowest possible starting point for price negotiations between producer and purchaser. It is set at a level which ensures that producer organisations receive a price which covers the cost of production for their product. This means it also acts as a safety net for farmers at times when world markets fall below a sustainable level. However, when the market price is higher than the Fairtrade minimum, the buyer must pay the market price.
Producers and traders can also negotiate a higher price, for example on the basis of quality. For some products, FLO also sets different prices for organic crops, or for particular grades of produce.
Look up the Fairtrade minimum prices on the FLO website here.
Fairtrade premium
The Fairtrade premium is a sum of money paid on top of the agreed Fairtrade price for investment in social, environmental or economic development projects, decided upon democratically by producers within the farmers’ organisation or by workers on a plantation. The premium is fixed and remains the same even if the producer is paid more than the minimum price for the product. The premium fund is typically invested in education and healthcare, farm improvements to increase yield and quality, or processing facilities to increase income.
Look up the Fairtrade premium information on the FLO website here.
Prefinance and better trading relationships
The standards allow Fairtrade producers to request partial pre-payment of a contract they have with a trader. This is important for small-scale farmers’ organisations as it ensures they have the cash flow to pay farmers at the time they deliver their crop. Buyers are also required to enter into long-term trading relationships so that producers can predict their income and plan for the future.
Better working conditions
The Fairtrade standards protect workers’ basic rights as defined in the conventions of the International Labour Organisation (ILO) relating to:
- freedom from discrimination
- freedom of association (the right to join a trade union) and collective bargaining
- fair conditions of employment
- no forced or child labour
- occupational health and safety.
Empowerment
Producers are involved in decision making within the Fairtrade system. Through FLO’s Board, its committees and consultation processes, producers can influence prices, premiums, standards and overall strategy.
Fairtrade Africa is supporting producers’ capacity to fully participate in Fairtrade decision making processes, as well as unifying them under one umbrella for increased visibility, voice and bargaining power within the overall Fairtrade movement.
Environmental management
Fairtrade producers are often located in countries that are being hardest hit by climate change. Through Fairtrade premiums which can be used for social, economic or environmental projects, producers are able to invest in a range of environmental protection programmes which will contribute to the solutions needed for tackling climate change.