By Maggie Romuld

When the global food system unravelled last year, the extreme volatility in food prices was blamed on such various factors as unstable oil, agricultural land seconded for biofuel production, extreme climate events, shortfalls in production, global turmoil in financial markets and world trade policies. Regardless of the cause, according to the World Bank, food prices increased 83% between February 2005 and February 2008, and then abruptly, in the second half of 2008, declined sharply.

Agricultural products exported by the global South are particularly susceptible to volatility and among those hardest hit by price instability are chronically hungry smallhold farmers, who, like the majority of households in developing countries, spend more on food than they earn from selling it. Price volatility leaves farmers uncertain about how much they will be paid for their crops at the end of the season. While the farmer is undoubtedly concerned with the cash he will receive for his harvest, every decision he makes during the growing season is doubly difficult if he took a loan to pay for labour, fertilizer or equipment because he doesn't know if he will earn enough to repay the bank. Unpredictable prices also increase lending risks for banks; consequently, they may raise interest rates to cover uncertain risks, or they may refuse to provide credit at all, forcing farmers off their land to join the ranks of the urban poor.

For a number of years, farmers' interest organizations throughout the world have been promoting the development of farmer-owned organizations such as unions, cooperatives and commodity associations. Farmer cooperatives are owned and operated by farmers, for farmers, and their ultimate goal is to improve the standard of living and quality of life by increasing the farmers' income through improved productivity and marketing of their produce. Although cooperatives can be affected by many problems, including inequitable distribution of power and government interference, research suggests that they are still a relevant organizational form for small and medium-scale farmers. Through cooperative agreements, farmers are able to collectively gain and maintain access to competitive credit and input sources, and strengthen their bargaining power. Cooperatives also allow farmers to capitalize on new marketplace opportunities (including value-added processing) and compete effectively in the global economy with access to international and Fair Trade markets.

The Fair Trade movement was conceived to address the concern that "traditional market systems of trade maximized economic profits for the global North, while costing the South not only economically, but also socially and environmentally." In the 1980's, development organizations were advocating "trade, not aid" as the proper method for sustainable development, and international Fair Trade strategies began to focus on crafting better trade deals, providing access to credit at reasonable rates and helping farmers cope with extreme volatility in commodity prices. For commodities like coffee and cocoa, Fair Trade certifying organizations establish a fair price that guarantees farmers will be able to meet their living needs, with enough left over for them to improve their communities. Fair Trade producer groups are also paid an additional "social premium" to invest in strengthening their cooperative groups and communities. By the end of 2008, there were 746 Fairtrade (trademark) certified producer organizations representing over one and a half million farmers and workers and, despite the global recession, last year the worldwide sales of Fairtrade products grew by 22%. By this time, consumers spent the equivalent of 4.5 billion Canadian dollars on Fairtrade products.

In 2008, the Fairtrade Premium contributed the equivalent of almost 19 million Canadian dollars to Fairtrade coffee farmers alone. Coffee is an important export crop in Mexico, especially for the southern states, and in Oaxaca, Mexico, the Union of Indigenous Communities of the Isthmus Region (UICIR), established in 1983, is considered by some as the first cooperative group of farmers to export coffee through the Fair Trade model. Their long and successful collaboration has resulted in a full range of community development projects, from schools and health clinics, to the strengthening of their indigenous culture. The co-op also helped create an agricultural extension and training program, cooperative corn mills, a hardware/farm supply center, the region's only secondary school and public bus line.

Ethiopia's Oromia Coffee Farmers Cooperative Union (OCFCU) is another example of cooperative success. Ethiopia is Africa's largest coffee exporter and coffee farmers, hard hit by volatile prices, are facing a sharp increase in poverty and hunger. The OCFCU was established in 1999 to facilitate the direct export of coffee produced by Ethiopia's small farmers, and assist in marketing, processing and credit issues. In the past ten years, the Union has grown from 34 to 146 cooperatives (with approximately 130,000 members.) According to their website, 70% of the Union's profits from sales and export coffee are distributed back to the cooperatives. The cooperatives then distribute 70% of the net profit as dividends back to the member farmers, retaining 30% for "capacity building, investment on fixed assets, social services and reserve." While Ethiopian producers readily acknowledge the benefits of Fair Trade initiatives, including a tripling of income compared to farmers not engaged in cooperative farming, they are also considering a bold new move - trademarking their specialty coffees - to further improve their income.

The global economic recession has added another layer of misery to the lives of small farmers in the global South, exacerbating food price issues and impacting those least able to cope - the poorest people in the poorest countries. In the developing world there are two ways to achieve food security - people can buy their own land and produce their own food or they can generate purchasing power from employment in either farm or non-farm jobs to pay for food. Farmer cooperatives and the transformation of world agricultural trade to a Fair Trade paradigm offer the best opportunities to achieve one or both of these alternatives. They offer farmer-focused, competitive, sustainable agricultural production and can play a key role in the development of rural areas in the global South as well as in fighting poverty.

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