Volatile cocoa prices are pushing African farmers further into poverty
A group of women from an agricultural cocoa cooperative dried their cocoa beans on April 17th, 2019, in Adzope (southern Ivory Coast).
Issouf Sanogo AFP | AFP | Getty Images
Volatility on cocoa market means that African farmers will lose 20% or more of their incomes. It is being suggested that the global chocolate industry “turning a blindeye” to these serious issues.
Farmers in the Ivory Coast could receive up to 21% more year-over-year for their 2021/22 cacao harvest.
Oct 2020: The cocoa farmers in the country were paid 1,000 West African CFA francs per kilogram of cocoa. However, the minimum guaranteed producer price of a kilogram cocoa currently stands at 825 West African CFA Franks ($1.45).
This is despite a rising price on New York’s ICE exchange. Cocoa futures prices have increased by about 10% in the period between October 2020, and October 2019.
Lower prices will likely drive farmers to poverty and increase modern slavery. This could also lead to increased rates of child labor. The cocoa farmers are more vulnerable to deforestation, which is caused by people trying to get more money and increasing their land.
Assata Doumbia is a cocoa farmer in Ivory Coast and heads of the industry cooperative ECAM. She told CNBC that it was difficult for her to take the significantly lower price.
ECAM, based in the city of Méagui, represents 2,466 cocoa producers who collectively harvest 7,000 tons of cocoa every year. The Ivory Coast accounts for 70%. more than a third of global supply
Doumbia stated via video that “With the price of 825 Francs and the production costs, it’s going to be difficult for us to feed our families and look after ourselves, and invest in the farm farms.” We accept it because we must.”
However, she stated that rising prices have also caused headaches to cocoa producers as the chocolate manufacturers allegedly refused to pay more market value.
The Living Income Differential was introduced by the Ghanaian and Ivory Coast authorities in 2019 to increase cocoa prices. This is to help farmers avoid poverty.
Some chocolate companies tried, however, to avoid the LID. Mondelez International was accused by authorities of failing to pay the premium — an allegation it denied — while U.S. candy giant Hershey turned to futures exchangesReuters reports that this was done to reduce the cost. Hershey stated in a statement that they would not disclose details about specific purchases or hedging. The news agency was told by Hershey that it purchased cocoa from “a variety of sources” and included one company that had seen it pay the LID premium in Ghana and Ivory Coast.
Doumbia stated that one year ago, the cost of cocoa was 1,000 francs. Big Chocolate was not happy with this price. It’s hard to accept a lower cost, but we may be able sell all our cocoa now.
Doumbia claimed that she’s seen soil fertility decline over the years. This she attributes to climate change. So, she decided to devote four hectares of her farmland to rubber and not cocoa.
CNBC spoke with her about the cocoa production culture of Ivory Coast. We produce the highest amount in the world, so it won’t disappear in a day.” “At least every family has a person that produces cocoa – it’s what we love to do, it’s our job, it’s in our hearts.”
She added, “People abandon cocoa in favor of rubber.” You’ll see it more often with such difficult work and such low prices for cocoa.
According to a 2018 report on the industry from the VOICE Network — a global network of NGOs and Trade Unions — large chocolate companies increased their profits after the Ivory Coast’s cocoa prices dropped significantly in mid-2017.
Tony’s Chocolonely, a Dutch chocolate manufacturer, pays an additional premium over the farmgate price to purchase its cocoa. It recently announced plans to increase that premium from $462 per metric ton – 26% above farmgate price – to $793 per metric ton – 54% above farmgate price – for the 2021/22 season.
Paul Schoenmakers was head of impacts at Tony’s Chocolonely and accused Big Chocolate of “turning blind eyes” to African cocoa farmer’s plight “in quite an awful way.”
CNBC interviewed him via telephone and said that while they had come up with a lot of fancy programs over the years, it hasn’t been able to produce any results. And that is mainly due to the fact they continue to spend too much on cocoa.
He said that Tony’s price suggestion would have an impact on 0.7% of global annual chocolate revenue.
Schoenmakers explained that, despite the fact this sector being extremely rich, it would still generate huge profits every year. This is all about sending a portion of the value to cocoa farmers. It’s right and the right thing.
Fairtrade estimates that the average Ivory Coast cocoa farmer household is eight strong and earns an annual income around $3,000. Fairtrade found that an average cocoa farm household needs to earn about $7500 annually in order to pay their living costs.
David Finlay from The Fairtrade Foundation’s senior supply chain manager said that “price matters.” This price drop is problematic not only because of the potential for lower cocoa farmer incomes, but also because these incomes could lead to other problems such as deforestation and social and environmental issues.
Mars Wrigley, which makes M&Ms and Snickers bars, told CNBC in a statement that today’s supply chain was “not in line with our ambition that everyone — especially cocoa farmers — should have the opportunity to thrive.”
According to a spokesperson, “Through our Cocoafor Generations strategy and ongoing support for LID, as well as disclosure of our progress publically, we continue to focus on the crucial issues that require attention for cocoa farming families in order to prosper and remain sustainable.”
Ferrero, a confectionery company, said that it has been helping farmers on the Ivory Coast improve their livelihoods for many years. It added that the goal was to “build value chains and maintain them.”
Cadbury manufacturer Mondelez InternationalCNBC reported that Cocoa Life had committed itself to raising farmer incomes. It also noted that Cocoa Life has invested 400 million into sustainable cocoa sourcing programs Cocoa Life.
For example, a spokesperson NestléCNBC was informed by an email sent to them that the cocoa sustainability program had been in existence for more than a decade. It announced that in September it will implement new programs to provide living income for farmers.
In the interim, Lindt & Sprüngli – which sources its West African cocoa beans from Ghana – told CNBC it had initiated a program in 2008 aimed at improving quality of life for farmers.