Fair Price

Fair Price

Power in food supply chains is largely concentrated in the hands of a relatively small number of multinational companies, wholesalers and retailers, often based in the wealthier consumer countries.   The highly competitive climate in which these players operate results in significant and continuous reduction of costs, which severely impacts producers’ ability to earn a decent income. At the end of the day, the ones most negatively impacted by this trend are the smallholder farmers.

Smallholder farmers are at the beginning of the supply chain and have very little power. They, therefore, shoulder the burden of the cost-cutting practices taking place at higher levels in the supply chain. This is why Fairfood’s Fair Price Programme focuses on:

  • balancing bargaining power between buyers and sellers;
  • contributing to improvements in smallholder farmers’ income.

Fairfood sees fair pricing as a solution to eradicating the extreme poverty many of these farmers face.

For us, a fair price is a price that will enable a smallholder farmer to cover for

  • living costs for his/her family, as well as for any hired worker;
  • basic production costs;
  • externalities (including environmental costs) and risks.

If they receive a fair price, farmers can break out of the poverty cycle, allowing them to invest in improving their production conditions. However, current prices in many food supply chains make this difficult, reflecting how skewed the power is between farmers and large multinational companies. Unfortunately, farmers pay the ultimate price.

How we work

Fairfood pushes for fair price mechanisms that will enable smallholder farmers to have the bargaining power for a just trading system and contribute to the improvement of the lives and livelihoods of smallholder farmers. We do this through the following methods:

  • Promoting and coordinating the development of a fair price setting mechanism by engaging with experts and knowledge institutes, government bodies and voluntary initiatives;
  • Engaging with key retailers and brand owners to demand commitments to policy and practice changes with regard to low prices paid to smallholder farmers in food supply chains.

Connection with Fairfood’s Living Wage Programme

The concept of fair pricing for smallholder farmers is very similar to the concept of a living wage for workers. Many smallholders supply to one buyer, creating a relationship akin to that between an employer and an employee. Moreover, a living wage can only be paid to a worker if the farmer or factory owner secures a fair price. For more information on living wages for workers, please refer to our Living Wage Programme.