FLO International Establishes Minimum Pricing for Fair Trade Tea

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Traditionally, the Fair Trade system operates by rewarding certified producers with a premium that is collected in addition to the wholesale cost of their products.  These premiums are then reinvested into the producer’s communities for their social and/or environmental betterment.  However, beginning in February of this year, FLO International will (for the first time ever) introduce minimum prices for certain Fair Trade Certified teas.

A Diverse Tea Marketplace

Tea is one of Fair Trade’s most diverse products, with grades and types of tea ranging from the fine-grade mass-market teas that are used in tea-bags to high quality specialty leaf and organic teas (such as those featured by www.ArborTeas.com). Market prices for tea vary tremendously, not just according to grade and type, but also depending on what production methods are used and the geographical origin of the tea.

A Challenging Environment for the Tea Producer

FLO’s decision to introduce minimum prices reflects concerns over downward trends in global market prices for tea over the past five years. Faced with global oversupply of tea, producers in many regions are now selling much of their product at below the cost of production. FLO anticipates that the new pricing system for tea will help tea farmers around the world to meet their costs of production, and to support the sustainable development of their business, even if market prices fall still further.

How will this affect Arbor Teas customers?

The new minimum prices for tea will apply only to those teas which are typically sold at lower prices, where minimum prices can make a real difference to producers’ income security. Specifically, FLO is introducing prices only for non-organic teas produced using the crush-tear-curl production method, and for certain lower grades of tea produced using the orthodox production method.  As Arbor Teas customers are aware, we carry only high-quality, organic leaf-grade teas, produced in the orthodox fashion, so the minimum prices that are currently being established by will have no direct effect on our customers.  It is possible, however, that FLO will introduce minimum prices for specialty organic and leaf-grade teas in the future, so stay tuned for further updates on this topic.

The minimum prices being established by FLO International will vary according to the country and region of origin, reflecting the diversity in cost of production and market prices for different origins.  As with all Fair Trade Certified products, it is expected that many such teas will continue to trade at market prices considerably above the new minimum price levels.

January 17 2008 04:02 pm | Fair Trade

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