Many coffee farmers started a transition to organic production during the recent coffee price slump in the international markets in 2000–2004, encouraged by the growth of certified coffee markets, low prices in mainstream markets and assistance from development projects. The impact of organic production on farmer welfare is an important issue since organic coffee production has been suggested to lower yields and farmer income compared with what can be achieved
using conventional methods (van der Vossen, 2005). Globally, approximately half of Fair Trade coffee is also organically certified and vice versa. Despite this substantial overlapping of the two certification schemes, most studies on Fair Trade do not analyze the economic viability of organic coffee production or the advantages conferred by Fair Trade compared with organic certification alone. Although studies have stated that farmers receive price premiums for Fair Trade organic coffee (Bacon, 2005; Daviron and Ponte, 2005), the impact of certification on farmer welfare is a complex issue because production
intensities, yields, production costs and coffee prices vary widely both in conventional and organic production. The aim of this study was to
evaluate the viability and advantages of Fair Trade organic coffee production and trade in the case of the Nicaraguan small-scale farmers. The following issues were studied: 1) yields in organic and conventional production, 2) costs of production, comparing especially the costs of organic and inorganic fertilization, 3) price premiums received by cooperatives and farmers for Fair Trade organic coffee, and 4) farmer income from Fair Trade organic and conventional coffee
production.
Organic coffee production has multiple potential environmental benefits. Organic standards require coffee farms to have a structurally and floristically diverse shade cover (e.g. OCIA, Organic Crop Improvement Association International, Inc., 2005). Organic coffee farms thus provide environmental services that resemble those provided by forests (Bacon et al., 2008a: 338–339). As coffee farms are located in some of the biologically most diverse and most threatened
environments in the world, their role as refuges for wildlife is important (Moguel and Toledo, 1999). Coffeefields store carbon from the atmosphere and protect watersheds by slowing down run-off. Organic coffee production also replaces inorganic fertilizers with organic fertilizers as well as pesticides and fungicides with less harmful alternatives and prohibits genetically modified organisms (OCIA, Organic Crop Improvement Association International, Inc., 2005; IFOAM,
International Federation of Organic Agriculture Movements 2007). More shade trees and low-intensity farming methods, however, also imply lower yields (Perfecto et al., 2005), which is problematic from the point of view of rural poverty. On a global scale, population and economic growth associated with changing eating habits, limited arable land and biofuel production create pressures to agricultural intensification. A central question for sustainable agriculture is how
production can be intensified without causing serious damage to the environment (Tinker, 1997; Pretty et al., 2003).
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