Fair trade and organic farming are recent innovations playing a significant role for agriculture in developing countries. These innovations are mutually reinforcing as fair trade opens up new market prospects for organic products. Organic products have price premiums and the demand for these products is growing recently at a rapid rate globally primarily because of the health and nutritional benefits of organic food. The expansion of organic agriculture is income enhancing particularly for small and marginal farmers because they are not able to use chemical fertilizers and other chemical inputs in farming. Participation in organic farming and fair trade networks is beneficial in reducing farmers’ livelihood vulnerability. This type of farming has a potential to improve soil fertility, biodiversity and other environmental content of the ecosystem.
Domestic markets for certified organic products in developing countries are much less developed till today, with the exception of China (IFAD, 2005), while exports of organic and fairtrade products from developing countries are increasing. Fair trade buyers or importers pay a price premium for fairtrade-certified products. Fair trade is beneficial for the vulnerable farmers in developing countries because it reduces the risk generated from price fluctuations as observed in the free trade. However, farmers selling certified organic or fairtrade products may not receive substantial financial benefits. This is because, although prices of organic and fairtrade certified products are greater than those of conventional products, yield of organic products is smaller than that of conventional products and thus, total revenue from organic and fairtrade products is lower than revenue from conventionally grown crops (Tina and Zeller, 2011).
One of the major challenges of organic farming is the creation of domestic demand for organic products in developing countries. While Australia, Europe and the US are the leading importers of organic products, Latin America, Asia and Africa where small land holders are predominating are the principal producers of organic and fairtrade products (Willer and Kilcher, 2011). Nevertheless, access to markets, certification, and labelling organic products still challenges in developing countries. The third-party certification systems in organic agriculture is also problematic in these countries. Organic agriculture has to be certified in accordance with the standards laid by the International Federation of Organic Agriculture Movements (IFOAM). In contrast, the fair trade standards have been taken care of by the Fair trade Labelling Organizations (FLO) International.
Organic agriculture is a feasible option in regions where labour is abundant. India is a country with high potential of expansion of organic agriculture because of its predominance of small and marginal farmers. Proper organic policy and institutional frameworks at the national and subnational level can facilitate access to domestic and export markets for certified organic products.
In India, agricultural credit is facilitated by the National Bank for Agriculture and Rural Development (NABARD), through commercial banks (50 percent), cooperative banks (43 percent) and regional rural banks (7 percent). Private sector partnerships are the key source of financing for the organic supply chains. Private companies in the supply chains, such as buyers, provide their own funding to support their partners’ activities and those companies collaborating in fairtrade agreements.
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The post-harvest operations include handling, processing, packaging, storage and display operations need to be separate from conventional products to ensure that the organic product does not come in contact with nor have other ingredients added that might compromise its organic certification. Efficient and timely post-harvest operations at the farm and rice mill and attention to storage and transportation conditions are critical to ensuring optimal quality of the organic rice at the point of sale and for consumption. As special care is required for the storage, processing, transport and marketing of organic rice, handling costs are considerably higher than those associated with conventionally grown rice.
Fair trade organizations distribute or import products that comply with fair trade specifications. In some cases, producers sell their products to a primary cooperative, which then sells to secondary and tertiary cooperatives that subsequently export the products. At each step of the process, producers and cooperatives have to meet the standards set by the Fairtrade Labelling Organizations International (FLO).
References
IFAD. (2005). Organic agriculture and poverty reduction in Asia: China and India focus. Thematic evaluation. Report 1664. Rome, International Fund for Agricultural Development.
Tina D. Beuchelt, Manfred Zeller. (2011) Profits and poverty: Certification’s troubled link for Nicaragua’s organic and fairtrade coffee producers. Ecological Economics, 70, 1316–1324.
Willer, H. and Kilcher, L. 2011. The World of Organic Agriculture. Statistics and emerging trends 2011. Bonn, Germany, IFOAM and Frick, Switzerland, FiBL.
