The guaranteed minimum price
« Improving producer revenues »
Objectives of the guaranteed minimum price
To allow producers to live decently and allow a sufficient profit margin, making it possible to reinvest in the production system.
Definition
Two minimum prices:
- Price paid to the producers (ex-field price); and
- Price paid to the producer organisation (ex-works price).
How prices are set
- In dialogue with the producers
- Via an evaluation of the production costs and decent incomes
- The prices must:
- Be higher than the production cost
- Allow payment of a decent income
- Allow a sufficient profit margin
- Be higher than the prices of “conventional” products (non-EFT or non-fair trade)
- Be higher than the local or international market value
Adjustment mechanisms
According to price fluctuations (raw materials, local currency, energy).