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Fair Trade:Overview, Impact, Challenges
Annex 3: Case Study - Coffee in Tanzania
includes pre-financing. In such cases, domestic traders are unwilling to sell such
coffee at auction. Indeed, auction data shows that private traders have been
repossessing (a seller and a buyer is the same company) more than 80% of their
coffee, a condition that could lead to anomalies in the operation of the auction. As a
result, there are claims that auction prices, and therefore producer prices, do not
properly reflect market conditions. Co-operative unions sell more than 90% of the
coffee purchased from the farm gate at the auction. Any malfunctioning of the
auction system would, therefore, represent a threat to the welfare of farmers.
However, the important question is whether auction prices of coffee that is not
repossessed are linked to world market prices (New-York futures prices) or not.
Temu (1999) shows that, from 1994/95 to 1997/98, Tanzania auction prices for coffee
that was not repossessed did effectively track the New-York futures prices for arabica
coffee.
5. Fair Trade in the Tanzanian Coffee Sector
FT organisations have been buying coffee from Tanzania since the 1970s when they
bought from government parastatals. 18 Since 1990 it has been possible to purchase
direct from co-operatives and a range of European, North American and Japanese FT
organisations have purchased coffee from four Tanzanian co-operatives. In two
cases, initial sales to one FT organisation has opened trading channels to a range of
other FT and commercial organisations.
The Kagera Co-operative Union (KCU) was the first co-operative in the country to
export through FT channels when they sold 3 containers to Fair Trade Organisatie in
1990. Since then KCU has been selling coffee to a whole range of European
alternative trading organisations and companies carrying the Fairtrade label who buy
their coffee through the FT register. Over the last 6 years, FT sales have accounted for
18 Tallontire 1999
140
120
100
80
60
40
20
0
1972/73
Prices received by Tanzanian
coffee growers 1972-1999
1975/76
1978/79
1981/82
1984/85
1987/88
Year
1990/91
1993/94
1996/97