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Fairtrade Myths - 4

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Myth 4: "Fairtrade locks farmers into a fixed price" You may have read about the 'Fairtrade Minimum Price', this is indeed a real thing. But it's a safety net, calculated to cover farmers costs of production, and only coming into play in a worst case scenario. It is not something that locks farmers into a fixed price.
Let's use the example of Maria -- a farmer from a Fairtrade coffee cooperative in Colombia — to explain. In simple terms, if the market price of coffee falls below the Minimum Price set in the Fairtrade Standards, then under Fairtrade, Maria's cooperative would receive this guaranteed Fairtrade Minimum Price.
This safety net means Maria and other farmers in her coop can cover their production costs which helps them to predict their income and budget for the future. However -- and this is really important -- if the market price of coffee is above the Minimum Price, then the buyer must pay the higher price. And of course they can also negotiate higher prices on the basis of quality and other factors. This is something that people often don't pick up on, assuming that under Fairtrade farmers receive a fixed, flat rate that can never change, even if the market price of the crop they're growing is high.
It's also worth remembering that in addition to the receiving Minimum Price or market price, Fairtrade producers receive a bonus-type payment called the 'Fairtrade Premium'. This is an extra sum of money that they decide democratically how best to spend. Some might spend it on improved training and farming techniques, others on building schools and medical clinics. Fairtrade doesn't dictate what it's spent on, it's entirely up to the producers, but in the interests of transparency Premium spending is audited.

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