Global Climate Change, Fair Trade, and Coffee Price Volatility

Fair Trade coffee sales have grown exponentially over the past fifteen years amidst a volatile and shaky coffee commodity market. This paper incorporates the prior research that global climate change will lead to more climate shocks with research on the coffee market’s volatility and farmer welfare. In accordance with prior research on commodity volatility, I develop an OLS estimator of the volatility of prices received by growers and evaluate the effect of climate shocks on it. I find that, when control variables are introduced, the volatility of the coffee price does increase at a statistically significant level with a climate shock. I evaluate the claim made by the Fair Trade movement that their program is a way to mitigate climate change, and I incorporate qualitative research that confirms the concerns observed in relation to climate change and farmer welfare.