DAY 8: The cost of Fair Trade

DAY 8: The cost of Fair Trade

Tia - quinoa farmer from Bella Vista.

Tia – quinoa farmer from Bella Vista.

There are a few requirements for a quinoa producer group to become a Fair Trade group – they need to be organized, registered, have a leader and regular meetings.    According to Tito, to apply there is a refundable $538 processing fee that covers a site visit, and determination if the group meets the Fair Trade criteria.  If not, the funds are returned.  If they pass the review than they are now part of the Fairtrade CLAC international network – with headquarters in Germany.  This now gives them greater market access and more transparency and price protection.

Belle Vista farmers learn about how they can join Fair Trade and what the cost, earnings and benefits are.

Belle Vista farmers learn about how they can join Fair Trade and what the cost, earnings and benefits are.

The FOB Fairtrade price for conventional quinoa is $2,250a ton (or $247.50 per quintal).  The FOB Fairtrade price for conventional quinoa is $2,600a ton (or $286 per quintal).    In addition there is a $260 per ton Fair Trade premium of which producers receive 30% or $78.

It is interesting to note, that according to their December 18, 2016 Alibaba listing, Auster Foods, a small, non-fair trade company specializing in gluten free ingredients, is selling Royal Quinoa from the US at these same prices ($2,200 – $2,300).

FOB means “free on board” which means it is the price of the product the moment it gets onto the ship to be delivered to its final destination.  In this case for quinoa it would be the combined price paid to the farmer, the transportation to the processing plant – often 10 hours away in La Paz, processing and packaging fees, documentation and transportation to the port of departure – usually Arica, Chile a full day’s drive.  These prices vary depending on who the producers are working with and how much of the work they are doing themselves.  Currently the price most certified Fair Trade organic producers are earning, according to Jose Santacruz of Jacha Inti, is 400Bs a quintal ($57.14), or $571.40 a ton or 26% of the FOB Fair Trade price.

Quino cookies made in Challpatata for the holiday season.

Quinoa cookies made in Challpatata for the holiday season.

Though it seems little of the Fairtrade price gets to the farmers, they are still earning 22% more than the non-fairtrade market prices (310Bs or $44).

Once accepted in as a Fair Trade group, there is a $1,356 annual audit fee which is based on the number of people in the organization, in the case of APROGUILGA, there are 30 members.

To understand the scale of commercial export quinoa production, farmer groups work with 20 ton lots – of which they ship 22 tons of product to the processing plant (about 10% is lost in sorting).  The total value of these lots to the farmers is $11,428 (with a FOB of $44,000).  These quantities are stored and shipped throughout the year.  The farmers at Belle Vista, the 1,500 member community we visited today with 30 members in their producer group – store about 60 quintals each of quinoa in their homes – just enough for a lot.

Capura farmers review their Fair trade costa, investments and earnings.

Capura farmers review their Fair trade costs, investments and earnings.

So the questions the community has to answer is if it is worth it to invest all of their quinoa into the FairTrade program to earn $11,428 (approximately $380 each – enough to sustain rural family for about three months) plus the FairTrade premium which is worth about $1,560 – minus their $1,356 audit fee – leaving them with $204 for a community project.  The other option would be to keep their quinoa as a “savings account” slowly selling it as cash as needed in the common market of Challapata – a potential loss of $88* per family plus no community funds.

Though Fairtrade is certainly bringing some advantage to farmers, there is the difference in cost of production and earned income to take into account.  Farmers estimate their productions costs to be 750Bs per quintal ($107).  This means there is a $50 loss for every quintal sold and a FOB ton of fair trade quinoa still represents a $500 loss for farmers.  For farmers to make a 6% earnings on their quinoa, an amount they consider to be dignified wage for themselves – they need to make 800Bs per quintal ($114).

So for Fairtrade quinoa to really be fair at current prices, the FOB price needs to be around $2,800 a ton, an 18% increase, to be fully fair.

*formula: ($11,428 – $8,800)/30

Speak Your Mind

*