How much more do growers receive for Fair Trade-organic coffee?
I use a representative sample of coffee growing households in southern Mexico to estimate the price premium and gross income gain from participating in Fair Trade-organic markets through grower cooperatives. For the 2004-2005 season, FT-organic growers received an average premium of 12.8 cents per pound, yielding a gross income gain of 5% of total household income or about 26 dollars per household member. The gain is net of the costs of cooperative participation but not of other costs incurred to become certified and suggests that price premiums alone have a limited potential to increase household returns from growing coffee. More broadly speaking, the finding raises questions about the persistence of substantial price premiums associated with social or environmental labeling initiatives.
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