“Fairtrade International has introduced a new Living Income Reference Price for coffee, sourced in Indonesia’s Aceh region as part of its ongoing global effort to protect farmers from market volatility and empower them in achieving decent and sustainable livelihoods.”
Starting with West-African Cocoa and Vanilla, the non-profit organisation’s Living Income Reference Price – or LIRP – is designed to precisely reflect the prices that would be required for smallholder farmers to maintain a decent standard of living, “including a nutritious diet, clean water, decent housing, education, health care and other essential needs, plus a little extra for emergencies and savings – once farm costs are covered. But whereas minimum prices and premiums are a prerequisite for Fairtrade certification, LIRP acts more as a reference.
in 2020, they (Indonesia’s coffee farmers) earned only 40% of a living income on average.
In the coffee sector, Colombia was the first country to have its coffee price assessed by Fairtrade International. Recently, the organisation unveiled LIRP for coffee produced in the Indonesian Aceh region, which is famed for its quality, low acidity and organic production.
Carla Veldhuyzen van Zanten, Fairtrade International’s Senior Advisor for Sustainable Livelihoods, said that farmers need to be able to rely on the price. The organisation consulted with “Indonesian coffee industry experts and farmers to establish a sustainable target yield and, from there, we calculated the price farmers need to receive to support sustainable farming as well as a decent living for their households.”
These steps were necessary as Fairtrade’s research involving more than 360 farmers in the Aceh region showed that “in 2020, they earned only 40% of a living income on average.”
Based on farm and local financial data, Fairtrade International has set the current reference price at 13,600 Indonesian rupiahs (US$0.95) per kilogram of coffee cherry, which translates to roughly $2.82 of green coffee per FOB contract. The organisation claims this farmgate price should cover farm costs to achieve and maintain sustainable production – in Aceh region, this means organic production – and pay a living wage to hired workers.
The proposed reference price is 26% higher than the current market price for Aceh coffee, which rose due to the global rise in coffee price. The price is only referential, as its name suggests, but Fairtrade is planning living income projects with coffee companies and producer organisations. The aim is to address various approaches that would lead to closing the income gap, for instance, “by optimising yields or diversifying income, as well as paying the Living Income Reference Price.”
