This is how the fair price works

When you pay for your fairtrade bananas, your money does the banana farmers more good than when you buy bananas that are not fairtrade. Even if the farmers are unhappy that the price has remained the same while the cost of production has risen, it’s still fairer than the market price of bananas during most of the year.
This is how it works.
On the banana market in general, the prices fluctuate a lot. Sometimes, during the low season in the summer when the demand goes down, the price can plummet to 1-2 dollars per banana box. This means that farmers can’t cover the cost of production. Sometimes, during the high season in the winter when demand is high, the price goes up to 12-13 dollars per box.
Many farmers also sign longer contracts with their buyers, and decide a fixed price for a longer period. But with the financial crisis, buyers are increasingly reluctant to sign long contracts.
Within Fair Trade, there’s a safety net called the fairtrade minimum price. It varies depending on the country and the product, and has been calculated to cover the cost of production. When the farmers and buyers within Fair Trade negotiate a price for the bananas, it cannot be lower than the minimum, and it must be higher than the market price at the time of signing the contract.
The price does not go directly to the farmers, but to the cooperative, which then decides how much the farmers get.
In addition to the minimum price, the producers are guaranteed a fairtrade premium of one dollar per box, to be used for social and environmental projects for the good of all the farmers.
When the bananas have left the port and the seller, they have to be transported to Europe. The freight and the tariffs vary, as does the cost of production, between countries. All this is considered when the buyers and sellers negotiate about the price.
-Our bananas cannot be more expensive than other countries’ fairtrade bananas, because the supermarkets always buy the cheapest ones, says Asoguabo’s general manager Lianne Zoeteweij.

Here’s where the money goes

  • Every box of bananas weighs 18,14 kilos.
  • The Fairtrade minimum price for conventional bananas from exporting cooperatives in Ecuador is 6,75 dollars per box, and the premium is one dollar, which means 7,75 dollars per box.

Sources: Asoguabo’s general manager Lianne Zoeteweij, The Fairtrade trade criteria and price tables.

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1 Comment

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One response to “This is how the fair price works

  1. Not sure if you’ve seen this blogpost, but Im sure you can set the record straight with real life examples – http://zealfortruth.org/2009/04/the-sham-of-fair-trade/

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