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Alternative trade initiatives and income predictability: Theory and evidence from the coffee sector

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Alternative trade initiatives and income predictability: Theory and evidence from the coffee sector

The third in a set of five reports on ways to tackle the commodity price problem, this paper examines the effectiveness of private sector sustainability standards such as the organic and fair trade movements in the coffee sector as ways to provide coffee farmers with more predictable and stable incomes.

Supply chain instruments, through the diverse social, economic and environmental criteria they specify, have the potential to reduce risk across a whole range of farmer activities, thereby setting a foundation for improved stability not just in price or revenue, but in income itself. Ultimately, it is this understated, and underrated, feature of private voluntary sustainability standards—namely their potential impacts on income stability—that arguably offers the greatest promise in promoting stability in farmer livelihoods and opportunities for sustainable development.

This paper begins with a brief overview of the general history of, and responses to, price volatility in the coffee sector. It then reviews the main elements of key private voluntary sustainability standards presently operating in the coffee sector, considering the theoretical and empirical links between such instruments and the various aspects of income stabilization (including price) in the coffee sector.

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