Seattle Times business reporterMATAGALPA, Nicaragua — The 200 workers at Eddy and Mausi Kuhl's coffee farm are paid living wages and have homes with electricity, running water and concrete floors. They help make decisions about the operation of the 560-acre farm, and their 400 dependents receive benefits, including an on-site school and health clinic.
To their neighbors, many living in shacks pieced together from scrap wood and mud, those conditions probably sound like a good deal. Yet for all the benefits the Kuhls provide their workers, they cannot sell their coffee with the Fair Trade label because their farm is too big.
The size limit is one drawback to Fair Trade, which guarantees an above-market price for crops. The program doesn't teach farmers how to compete in the global market, critics say, and the coffee tastes bad.
It also isn't the only program that treats farmworkers fairly.
"The Fair Trade movement has some inconsistencies," said Carlos Vargas, head of an umbrella group representing 4,000 small coffee farmers in Costa Rica. "It's been oriented toward wage support, and that's not sustainable."
Eligible coffee is labeled with a gray-and-white Fair Trade logo by TransFair USA, an Oakland, Calif.-based group, and sold for $1.26 a pound — $1.41 if it's certified as organic. Individual farmers say they pocket about 90 cents a pound through the program.
In Nicaragua last year, farmers sold coffee for an average 59 cents a pound, the government said.
Under the Fair Trade program, farms are organized into cooperatives to increase their marketing clout. The farms have to be small — most are family-run and less than 12 acres — although TransFair doesn't specify a size limit. The co-ops, rooted in 1980s land-reform struggles, take some of the profit and use it to pay for coffee mills, technical training for farmers, and projects such as rural schools.
"In this time of desperation in coffee communities around the world, Fair Trade-certified coffee helps give hundreds of thousands of farmers the critical resources they need to bootstrap their way out of poverty," said Paul Rice, executive director of TransFair USA.
The program is key to attracting socially conscious consumers, but many farmers who provide for their workers aren't eligible.
"We're not certified Fair Trade — we're too big. (But) we're fair to our workers," said Gloria Corrales, standing on the 20-acre farm near Aranjuez, Nicaragua, that she and her husband share with four family members and 80 hired workers.
The Fair Trade program's set rate provides a cushion if coffee prices fall, as they have since the mid-1990s. Tripled production in Vietnam during the past five years at the urging of the International Monetary Fund and mechanization in Brazil caused wholesale prices to drop by more than two-thirds.
In May 2001, many landowners in Latin America decided growing coffee wasn't profitable anymore and shut their farms. Several hundred workers in northern Nicaragua migrated to Matagalpa, a dusty city of about 50,000, in search of food.
Another exodus this year left more than 6,000 workers and their families camped out near the city.
Fair Trade is one program that seeks to prevent such upheaval. Other groups have praised larger farms in Nicaragua, Guatemala, Panama and elsewhere for providing comfortable living conditions and environmental protections.
In Costa Rica, national laws require a living wage and social programs for workers, even on farms that aren't Fair Trade-certified, Vargas said.
His organization, Coocafe, is considered one of the most successful in Central America, but only about one-third of the coffee produced by its nine co-ops is labeled Fair Trade. Treatment of farmers is the same regardless of the label on the coffee, which is priced according to quality and market rates, Vargas said.
TransFair says Fair Trade-certified coffee generally is grown by poor farmers who rely only on family labor, but visits to several farms and discussions with co-op staff indicate many farmers — even the smallest — hire help.
Fair Trade literature also implies coffee with the trademark is organic. But that variety actually accounts for about 28 percent of the total, farmers and importers say. TransFair says about 85 percent of the coffee it markets in the U.S. market is organic.
Fair Trade, whose supporters back it with an almost religious fervor, relies on consumers who buy the beans solely for the program's social benefits, retailers say. But critics claim the price-support system, by guaranteeing high margins, takes away incentives to improve coffee quality.
"At coffee tastings, the Fair Trade cup has usually been the worst," says John Neate, owner of JJ Bean, a coffee retailer in Vancouver, B.C. "Who will pay more to buy an inferior product?"
Perhaps because of this, the Fair Trade market has been shrinking in parts of Europe and is still tiny in the United States, farmers and importers say.
Sales of Fair Trade coffee dropped by one-third in 2000 and 2001 at Cecocafen, a top Nicaraguan co-op, even as total coffee sales grew.
Fair Trade coffee is becoming more common in the United States, partly because companies such as Starbucks have agreed to sell a limited amount in their stores.
But farmers say they're worried fickle consumer tastes could turn. Although prices are guaranteed, if the total market shrinks, farmers lose out, potentially causing as much damage as the global coffee glut.
Farmers are responding by working to improve taste, said Pedro Haslam, Cecocafen's general manager.
Outside Esteli, Nicaragua, the country's largest co-op, Prodecoop, set up a coffee-tasting center where visiting buyers can evaluate the beans. The center was paid for by a $250,000 grant from the U.S. government, co-op general manager Merling Preza said.
"No one's putting a gun to anyone's head to buy," says Robert Fulmer, owner of Emeryville, Calif.-based Royal Coffee, one of the biggest U.S. coffee importers. "High quality is rewarded by more sales."
Royal buys some Fair Trade coffee and negotiates lower prices from farmers for other purchases.
Some Nicaraguan co-ops are setting up an umbrella group to maintain quality and market their beans under a common brand, "Café Nica." The group plans to build a market for local consumers who now buy imported beans and plans to set up one of Nicaragua's first gourmet coffee roasters.
To ease the minds of U.S. consumers unsure of what kind of coffee to buy, some retailers are skirting Fair Trade claims altogether, creating labels like "fairly traded" instead.
"The goal for consumers ought to be high quality, a better environment and social benefits," said grower Eddy Kuhl. "If they can't guarantee all three, maybe they should change the name."