Cocoa-buying companies met with government representatives from Côte d’Ivoire and Ghana on Friday to discuss how they could better combat poverty among farmers. In the meeting, the Cocoa buyers agreed to back a floor price on Cocoa sold from the West African countries. This includes paying a premium, on top of the Living Income Differential (LID) of $400 per tonne, on all Cocoa purchased from Ghana and Côte d’Ivoire.
Since the LID was imposed, markets have been discounting the country premium, which those countries saw as just another way to bypass the LID.
The floor price is to be set on the country premium with a target of $2,600 per tonne of Cocoa. Farmers are expected to earn a minimum of 70% of the target floor price.
So far, both countries have found it challenging to reach the targeted floor price, hence the need for the Côte d’Ivoire-Ghana Cocoa Initiative (CIGCI) to work with the Cocoa industry on pricing mechanism.
The living income in Ghana and Côte d’Ivoire is currently set at $2.16 and $2.49 per person per day. It is estimated that the Cocoa farmers in these countries only earn $0.78 per day on average, leading to poverty among farming communities and a greater risk of child labour.
This comes at a time when the chocolate companies have been trying to protect their margins by ‘shrinkflation’ (reducing the size of their product while keeping the price the same) to protect margins which have been eroded due to cost increases in the supply chain.
“Companies in the cocoa value chain have met with the governments of Cote d’Ivoire and Ghana to renew support for the LID as a starting point towards the pathway to achieving living incomes for farmers,” said the CIGCI in a joint statement with the countries’ cocoa regulators.
Companies that have agreed to back the floor price include Hershey, Mars, Blommer Chocolate, Nestlé, Sucden, Mondelez, Touton, Barry Callebaut, Cargill, Ferrero, Olam and Ecom Trading.
Chief Executive of the Ivory Coast Cocoa and Coffee Council, Yves Brahima Kone, expressed his dissatisfaction with companies dragging their feet on their LID commitments: “The aim of the pact is to allow all actors in the cocoa value chain to play their role and respect their engagements.”
Chief Executive of Touton, Patrick De Boussac said, “What we have signed for today is a better remuneration for planters.”
The Cocoa industry faces many difficulties as it strives to achieve sustainable and ethical farming. Significant changes cannot be achieved without cooperation between every stage of the value chain, but each change doesn’t happen in isolation, and the chocolate companies must now consider how to include this in their product pricing strategy.