Updated on June 18, 2019
The main way that farmers in the UTZ program improve their incomes is by growing better crops and improving their access to buyers. In addition, they receive a variable premium for their certified products. We get a lot of questions about how this exactly works. So we sat down with Adeline Paule, Senior Data Officer, to tell us everything about it.
A premium placed on farming
“The premium is an additional cash amount that must be paid above the market price for cocoa, coffee, tea and hazelnuts, because the product is produced sustainably and according to the UTZ standards,” explains Adeline.
This is pretty straightforward, but where the confusion often lies is around how the premium physically reaches the hands of the farmers. How much money are they actually getting? And how is it improving their quality of life?
How funds are allocated
“First, it’s important to understand that the UTZ premium is not a set price, it is an amount negotiated between the farmer (or group of farmers) and the first buyer, normally a trader,” says Adeline. “We don’t interfere in this because we believe that by allowing the market process to operate naturally, producers can come to agreements that are best for their farm or group of farms. They can negotiate the best deal for them and choose how to allocate their funds.”
Within a farmer group, the premium is split across the three types of costs:
- group management costs (e.g. audits);
- products and services used for the producer group (e.g. training);
- in-kind or cash payments to certified group members (individual farmers).
The UTZ standard does not dictate how the funds should be divided, but we do require that certified group members clearly benefit from the premium.
Transparency upholds the process
But what if these funds are not allocated fairly? How do we know the money is benefiting the farmers? Adeline explains: “Transparency is key to all we do. To safeguard our standards and ensure that farmers are benefiting from the UTZ program, farmer groups are required to report to their farmers about how the premium is spent in a clear way.”
Annual audits check whether they have followed this procedure. We then collect data about the premiums paid through our traceability systems: MultiTrace (for coffee and hazelnut) and the Good Inside Portal (for cocoa and tea). This is a process we are continuously improving through better data entry and traceability technology.
You can read more about how this works in our Premium Position Paper.
Interested in how farmers put this into practice? Find out how it operates in our UTZ Premium Guidance document.
Any questions? Get in touch with us.