Cocoa farmers: The impossible escape from poverty.

Wilfried Mattey, London, UK
January 30, 2024

D ecades of campaigns to boost cocoa price for growers in Sub-Saharan Africa have resulted in the formation, in 2018, of the Côte d'Ivoire and Ghana Cocoa Initiative (CIGHCI). The goal of this organization is to provide farmers with a fair remuneration as well as improve environmental and social practices. Côte d'Ivoire and Ghana agreed to institutionalize their efforts on March 26, 2018, by establishing a permanent body with its headquarters in Accra, Ghana.

Nigeria and Cameroon made requests to join the project in October 2022. The CIGHCI will now include Nigeria and Cameroon, accounting for 75 percent of the world's cocoa production. Ghana and Côte d'Ivoire are not the only stakeholders who are looking for a fair price for commodities. A non-profit sustainability research organization called ‟Aid Environment”, based in the Netherlands, has documented other instances of both public agencies and private businesses utilizing price-setting mechanisms in their own supply chains. According to ‟Aid Environment”, these instances have produced positige and impactful results and continue to give farmers constatn price through a share of the export value¹.

In 2017, the chocolate industry bought 43 percent of global cocoa production and generated a retail market value of US$106.19 billion. By 2026, the industry projects that these values will increase to US$189.89 billion². According to the Center for the Promotion of Imports from Developing Countries (CBI - The Hague, Netherlands)³, between 2022 and 2027, the European market for luxury chocolate could expand 8.1 percent every year. North America shows similar growth patterns. The North America Premium Chocolate Industry expects growth of 4.31 percent CAGR which will translate into a market value of US$131.52 billion by 2033⁴.

In spite of these exuberant expectations, West African farmers' incomes are stagnant or even falling. Ghanaian cocoa producers receive US$1 per day in income (which includes government subsidies). A cocoa farmer in Côte d'Ivoire makes US$0.78 per day⁵. Over the past 50 years, cocoa farmers' revenue has decreased despite production staying constant and prices paid to them either stagnating or collapsing.

Inequity

The World Cocoa Foundation (WCF)⁷ argues that cocoa oversupply is the cause of price declines. The WCF has produced publications to support the idea that market speculation and currency arbitrage (Dollars vs. GBP) are the drivers of price change. However, The International Institute for International Development Studies (IISD), argues instead, that production has been stable since the 1960s, despite climate change, plant diseases and ageing farms. IISD studies show that between 2008 and 2020, cocoa production increased from 4.27 million tons (Mt) to 5.76 Mt. By contrast, over the same period, yearly global chocolate consumption reached 7.5 million tons, while the average cost of a chocolate bar in 2023 increased by 8 percent.

The Global Landscape Forum (GLF – Germany)⁸ believes that the low prices farmers receive are due to intrinsic unfairness at the end of the value chain where global chocolate companies operate. Reserach has led the GLF to establish that ‟there is rarely equitable benefit sharing among actors in the cocoa value chain”. In fact, this civil society organization found that ‟cocoa farmers live in poverty despite the high market price for cocoa”⁹. Another global civil society organization, the UK-based Oxfam, also found that although Ghana produces more than 15 percent of the world's cocoa beans, this country earns only 1.5 percent (US$2 billion) of the US$130 billion chocolate business (2020)¹⁰. Data from Oxfam, reveal that the average income of Ghanaian cocoa growers decreased by 16 percent between 2020 and 2022¹¹. By contrast, during the same period, the confectionery profits of the four largest publicly traded chocolate companies increased by 16 percent on average.

Impossible escape from poverty

In Africa, farmers increasingly see cocoa and coffee as low-value crops responsible for the destruction of the ecosystem and widespread abject poverty. Since their introduction during colonial times, these export crops have not increased income or provided food security in Sub-Saharan Africa. The likelihood of a market restructuring to provide incentives for young Africans to continue cocoa planting is minimal. As a result, young Africans view cocoa and coffee as poverty traps. In Ghana and Côte d'Ivoire, farmers are beginning to abandon cocoa entirely. According to Oxfam, Ghanaian cocoa farmers are either selling their land to illegal miners or turning to artisanal mining to complement or replace their income¹².

Following thorough consultation with buyers, Côte d'Ivoire and Ghana added a US$400 premium to the price per ton of cocoa, known as the Living Income Differential (LID). The LID establishes a minimum floor price in order to eliminate what the two countries see as ‟unfair prices on the global market”. If adopted, the LID secures a price cap of US$2,600 per metric ton (mt). Farmers receive a minimum of 70 percent (US $1,820 per mt) of this new price. However, according to a study by the University College London (UCL)¹³, multinational corporations objected and opted to retaliate by boycotting African producers.

Hostile response

The idea of the LID met a frosty reception by chocolate makers and their trade associations. Supporters of chocolate companies mocked the CIGHCI initiative labelling it as a cartel and promptly predicting its demise. The relationships between cocoa producers and the Federation of Cocoa Commerce (United Kingdom) and the Cocoa Merchants' Association of America (CMAA) deteriorated. The Ghana Cocoa Board revealed that major trading houses were running a smear campaign against Ghana and Côte d'Ivoire because of the LID and the CIGHCI initiatives.

Côte d'Ivoire and Ghana withdrew from the CMAA¹⁴ in 2020, marking a further escalation of the dispute. In another twist, a 2021 study article from the European Union attempted to connect the LID to child labor and climate change. This argument became another weapons against the LID¹⁵.

The international cocoa market will continue to feed inequality and irreversible environmental degradation. One option for CIGHCI countries is to expand their domestic consumer markets. Chocolate, coffee, confectionery, and various derivative items for the cosmetic sector are all part of customers' buying habits in producing countries. This domestic market is an opportunity for African producers to lessen or eliminate their dependency on exports. Thus, rather than chasing an elusive fair price for farmers, the CIGHCI has the potential to become a collaborative effort to expand domestic cocoa transformation value chains and manufacturing. The African Continental Free Trade Agreement (AfCFTA) provides further opportunities.

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