IVORY COAST and GHANA — COVID-19 in Africa is causing more than just the obvious problems. It is now sabotaging a plan devised by the Ivory Coast and Ghana last year that would have guaranteed some two million cocoa farmers a living wage. Instead, the steepest dive in cocoa demand in a decade is cutting back on that guarantee.
The agreement between the cocoa industry and these African nations set a $400 per tonne living income differential (LID) payment if the market price fell low enough. There is an additional contingency for all sales in the 2020-21 season requiring that all prices stay within average ranges. This new pricing plan would have allowed the sub-Saharan governments to guarantee farmers about 20% more in profits.
As a result of decreased demand, international cocoa prices have fallen to their lowest in nearly two years. It landed below $2,000 per tonne even with the premium included. While cocoa farmers will still see increased revenue, they will miss the predicted income guarantee by about $120 per tonne.
Although the two countries produce approximately 65% of the world’s cocoa, many of the farmers who grow this cocoa live well below the international poverty line, earning just $1 per day. The World Bank estimates that 54.9% of cocoa producers and their families in the Ivory Coast live on less than $1.90 per day. With COVID-19 in Africa shutting down cocoa ports of export and further slowing trade, this crisis hits these countries particularly hard.
Problems with the Cocoa Industry
The chocolate industry is well-known for its dark underside. Supply chains rooted in poverty and littered with child labor are problems most acute in the Ivory Coast and Ghana. For the past two decades, consumers have been putting increasing pressure on companies to commit to more ethical business practices. They demand better sourcing of their chocolate and improvements in the conditions under which it is grown.
Cocoa farming is an unsustainable lifestyle. It is characterized by the severe volatility of the market and hard, manual labor with little to show for it in terms of revenue. Despite the fact that chocolate is a $100-billion industry, the Ivory Coast and Ghana get less than $6 billion of those profits, which are concentrated in the processing and distribution phases. This means farmers receive less than 6% of global profits even as they do the brunt of the work.
Initially, the governments of the two nations tried to set a price floor at $2,600 per tonne. However, executives at multinational chocolate and cocoa companies pushed back against this. They argue it lacks clarity and had the potential to create chaos in the international chocolate market. They instead agreed to the LID, which essentially acts as a $1.2 billion tax on the cocoa industry.
COPEC to Brighten the Dark World of Cocoa?
Wary of unstable markets, Ghana and Ivory Coast have partnered to protect their cocoa interests. Barry Callebaut, Mars Wrigley, Mondelez International Inc., Nestle and Hershey Co. are all top chocolate producers and distributors. They have released statements endorsing the initiative in support of potential improvements in farmers’ lives.
Some have dubbed the partnership “COPEC,” viewing it as similar to the Saudi Arabian oil cartel.
“If you look at OPEC, they are only controlling about 30% to 40% of the global oil supply and they control prices,” Mahamudu Bawumia, Ghana’s vice president, said. “If they have OPEC, we can have COPEC.”
The recent LID agreement is not the first attempt by cocoa producers to change the reality of hardships farmers face. Cocoa traders have voiced concerns, believing that the initiative would not work. They feared that the increase in prices would incentivize farmers to increase supply, effectively pushing prices back down.
Eat More Chocolate
Regardless of the possible caveats in the LID plan, consumers can help reduce the negative impacts of COVID-19 in Africa by enjoying more of their favorite chocolate candy bars. An increase in chocolate demand means an increase in prices. This would better the incomes of millions of cocoa farmers in the Ivory Coast and Ghana who live in extreme poverty and are being pushed further under by COVID-19 in Africa.
Many of the top chocolate manufacturers have limited available information about their supply chains. They often source their cocoa beans from multiple countries across the world. However, each of the top seven chocolate manufacturers in the world list either the Ivory Coast or Ghana, or both, as countries in their supply chains. These companies include Mars Wrigley, Ferrero, Mondelez, Meiji, Hershey’s, Nestle and Lindt & Sprüngli, according to a report by the International Cocoa Organization.
Four of these companies are the manufacturers of 2019 American favorites including Reese’s, KitKats, 3 Musketeers and Ghirardelli. So, fighting for cocoa farmers during COVID-19 in Africa is as easy as giving in to those hard-to-resist chocolate cravings.
– Olivia du Bois