Updated July 23, 2017
Organic agriculture is a production method that helps ensure biodiversity through minimal use of off-farm inputs; i.e. harmful chemicals, and utilizing production techniques that protect or improve ecological harmony.
Various government and international organizations establish organic standards. Any accredited company can perform the certification process and the following are examples of basic standards farmers need to meet:
- Minimal use of off-farm inputs such as synthetic agro-chemicals for three years prior to certification
- Farmers must keep detailed records regarding production and management plans
- Annual inspections by an accredited certifier
The organic coffee market has grown tremendously primarily due to consumer interest in the conditions under which coffee is grown as well as increased retail prices as a result of the premium markup on organic coffee. This premium gets spread throughout the coffee distribution chain, but not equally1. In general, retailers receive the highest premium, then roasters, then distributors, then importers.
A study performed by Jeremy G. Weber in 20112 found it's very difficult to measure the amount of net premium that reaches the producer due to various factors that may influence the producer's market performance. Product quality, cooperative and/or estate size, and location all affect market performance for a given coffee. Furthermore, when calculating premiums while only considering the cost of cooperative participation3, the net premiums for southern Mexican farmers for the 2004-2005 season were roughly 5% of total household income. Once you add all the primary and ancillary costs of certification, it's likely the net premium is zero and possibly a loss.
Organic certification requires farmers to change their production methods and make new investments in infrastructure to support and maintain the certification. The cost for certification to producers can often be prohibitive (especially for smaller farms) and can include direct costs such as certification fees and indirect costs such as costs to implement necessary infrastructure such as compost bins, fermentation tanks, consulting fees, etc.
Because it is so difficult to calculate the net premium for producers, it's better to think of the premium as a way to subsidize producers' efforts to improve living conditions and help improve use of natural resources.
Given that social premiums paid for organic coffee aren't likely to drastically impact farmer's bottom line, is it a sustainable endeavor?
1. Benoit Daviron, Stefano Ponte, The Coffee Paradox (Zed Books 2005) P. 166 ↩
2. Jeremy G. Weber, How Much More Do Growers Receive For Fair Trade-Organic Coffee? (Elsevier Ltd. 2011) ↩
3. Because the cost of certification is so high, often smaller farms work with a cooperative and the cooperative receives the certification.↩
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Updated July 23, 2017: changed format of series links.