I fear that Fairtrade gives the farmers no incentive to innovate the industry, and actually achieves the opposite by encouraging overproduction and mediocrety. As a farmer, if you get a minimum price that is sufficient to pay for your bills and more, why not produce more-and-more to make additional income. This will result in overproduction, which is the underlying cause of low prices in the commodities market. Obviously the farmer will want to produce it as cheaply as possible, which invariable will be at the expense of quality; high quality beans fetch the same price as the lower-graded stuff!
The economic rationale of fairtrade appears to be wholy flawed if my understanding is correct. If a consumer is prepared to pay a premium for average coffee with a Fairtrade label, than he or she may as well just donate money to Oxfam and buy cheaper regular coffee. That way you help poor malnourished people, without creating the economic incentive of undermining the coffee agricultural industry.
To be honest, my assumptions and understanding may be completely wrong. I would be delighted to see comments from people in the Fairtrade business. And if you can prove me wrong, the better!