I have been doing a lot of writing. Very little of it is interesting. Rather than just saying that and moving on, I thought perhaps I should demonstrate: The demand for coffee is not constant, but the contracts that Fair Trade exporters sign with producers acts as though it is.
If an exporter is under contract to buy a certain weight of coffee beans, those will be the first beans that the exporter purchases. In the ideal case, the market cost for coffee supports the Fair Trade cost, and the exporter knows that the small 6 to 10 cent difference between the market cost and the Fair Trade cost can be passed along to the distributors, roasters, and eventually customers. The exporter will not lose any money, and neither will anyone else down the line.
In practice, as seen in Figure 1, the market cost has not supported the Fair Trade cost. This is generally due to a surplus – several strong growing years in a row lead to importers building up stocks and purchasing less from exporters. Basic economics teaches that surplus stock leads to lower demand and a lower willingness to pay. The highest cost seen in the last two decades was caused by a drought in Brazil. The lowest cost was in November 2001 and was due to a several years of overstocking in Europe and the US. In that case, exporters first purchase those beans which they are contracted to purchase – the Fair Trade coffee at a the Fair Trade minimum cost. They will fill any additional demand with beans from non-Fair Trade producers. As we saw above, last year 12.3 billion pounds of coffee were exported from coffee growing countries, compared to only 108 million pounds of Fair Trade coffee.
There you go. That's a small sample of the thousands of words I am currently cranking out with regard to poverty and Fair Trade. I won't make you read the rest (assuming you did more than just skim the above, that is - if you did, your dedication knows no bounds - please be aware I haven't proofread it yet, ok?). You're welcome.