The economic realities of the global coffee market are not as simple as you are making them out to be. Some historical perspective:
There was once a time when coffee was trading at high prices. Demand was increasing, supplies were not increasing as much, and there were countries capable of producing coffees that weren't. Getting people to plant coffee in these non-traditional producing areas was seen as a way to develop economies. This idea was not without precedent. Brazil was largely built on coffee money, after all. Now, it takes a few years from the time coffee is planted until it produces its first crop. Coffee isn't a crop where you plant it, harvest it a few months later, and know what you've got. It takes about 10 years before you really know what you have with coffee. All of the sudden you have a huge increase in global coffee production. Making the problem worse, these new coffee producers were exporting coffees of such poor quality that more established producers never allowed on the global market. Now, coffee does not really fit the definition of a commodity, but it was usually sold with contracts that specify a differential above or below the NYBOT C price with those differentials based on several factors such as the quality of the coffee (coffee better than exchange grade selling for more, worse coffee selling for less) and the producing country (a comparative advantage model doesn't really work because a specialty grade coffee from Panama isn't going to taste anything like a specialty grade coffee from Tanzania).
Up until this point, the NYBOT C was cyclical. Sometimes it would go bust, but it would recover. This time it was different. There had been a fundamental change in the market which kept prices depressed for a long period of time and the differentials weren't keeping up. Simply letting quality producers go out of business wasn't going to be good for the producers and it wasn't going to be good for buyers either because someone who wanted to buy a nice coffee from Mexico wasn't going to be interested in some garbage from Vietnam. By setting a floor price for some coffees, Fair Trade did a lot of good in keeping those producers in business. You might find it interesting to look into the details of some Fair Trade producers and see what they're doing with those premiums. In many cases they're using them to improve the quality of the coffee and diversify the local economy, both things which reduce long term reliance on the Fair Trade premium, which seems to be exactly what you're advocating (though you suggest doing that before getting the capital needed to undertake such projects).
Now we're back into a period of higher prices for coffee (NYBOT C is over 200 as I write this and the differentials aren't dropping quickly which is a big part of why many coffee firms either have or soon will be announcing price increases) and this is due to many factors. Looking at the fundamentals, this is cyclical and prices will drop again, but probably not substantially within the next 18 months. We also have a lot more diversity in price discovery mechanisms for coffee which is a positive development, particularly for producers of high quality coffees. Any Fair Trade cooperative ought to be looking into getting out of Fair Trade in the long term exactly because that's not a long term sustainable model. Some cooperatives have already made that jump, others will follow, but to argue that Fair Trade was not beneficial in the long term simply is not supported by fact.