The content of this publication should not be republished in any shape or form without official consent from the author. You can reach out to the author for publication discussions via Kwame.a.kwarteng@gmail.com. If you want the complete 5000 worded report sent to you in PDF, kindly reach out to the author for a quote.
Fighting the global movers and shakers of the cocoa-chocolate industry is highly essential. The unequal distribution of value within the value chain impacts the earnings of producing countries. However, let’s not be deceived that an increase in the world market price results in an increase in the income of cocoa farmers (Refer to Graphs 2 & 3, Fig 1 & 2).
We can’t cry to the world that it’s unfair for producing countries like Ghana not to have a hand in the setting of cocoa prices when in our own home, we have refused to allow cocoa farmers to also lead in negotiating the farmgate price. It has also been established that the real income of cocoa farmers is further worsened due to their dwelling in rural areas that lack easy access to amenities that sustain their day-to-day livelihoods, as compared to those in urban areas.
We have also seen the unequal distribution of cocoa income between the Ghana Cocoa Board and the Smallholder cocoa farmers. Ghana Cocoa board pretend they have farmers representing on the producer price committee, yet I cannot establish how a farmer would agree for producer prices to stay the same in the sight of increased cocoa prices in both US$ and Gh¢ terms. Also, how many cocoa farmers are on the committee and how vital is their representation if a majority vote is used to decide the final decision.
Recommendations
Smallholder Ghanaian Cocoa Farmers must be paid in US Dollars, not in Ghana Cedi.
Ghanaian cocoa farmers need to be paid in US$ and not in Ghana Cedi. This will help insulate their incomes against inflation as the US$ has proven to outperform the Ghana Cedi consistently. As shown in Graph 7, the cocoa farmers’ real income is almost equal to the nominal income in USD terms.
This is because the US$ inflation rate, as shown in graph 7, is 2% on average from 2008/09 to 2020/21 crop year compared to Graph 6, where Ghana’s inflation rate has since been double-digit until 2018/19. Ghana’s inflation rate, on average, is on the rise, likewise the Ghana Cedi’s depreciation against the US$. At the same time, as is practised by most countries when inflation keeps being on the higher side, central banks increase lending rates to discourage consumption.
This will mean that Farmers who are mostly encouraged to take loans to finance their farm operations and other livelihood issues would be subjected to more debt due to high-interest rates, aggravating their livelihood challenges. Paying the farmers in US Dollars will hence allow the farmers to leverage the US$ appreciation rate to reduce the impact of inflation on their livelihoods. Paying Cocoa farmers in Ghana Cedi subjects them to demand, and supply-driven inflation of goods and services in addition to forex exchange driven inflation since a significant amount of our consumption is being imported using US$.
Paying Cocoa farmers in Dollars isn’t a big ask as their cocoa beans are already being traded in US$ by Ghana Cocoa Board. If Cocoa processing firms in Ghana can sell their semi-processed products in US$, then why should it be controversial to ask for Cocoa farmers to be paid in US$.
Graph 7: Nominal and Real Income of Smallholder Cocoa Farmers in Us$/MT Of Cocoa Beans Sold Source: Kwame Asamoah Kwarteng (2022) – Raw Data from IMF & Ghana Cocoa Board
Note: the 2020/21 nominal income excludes the LID payment. The reason has been explained here.
Cocoa farmers-led annual negotiations for the % share of the world market price of cocoa, not a Gh¢-based producer price.
As highlighted in recommendation one, there are a lot of real income benefits if cocoa farmers are paid in US$ rather than Gh¢. We also talked about the cocoa producer price committee’s role in determining the producer price of cocoa each year and claims that they have cocoa farmers on the committee. So instead of the committee being the arbiter of what a fair producer price is, let’s flip the script to allow cocoa farmers first to be the ones to propose how much they want to be paid as the producer price of their cocoa. Secondly, instead of offering a price, I would recommend the cocoa farmers propose a % of the world market price in US$ at which Ghana cocoa board sold their beans.
This will lead to Cocoa farmers’ ability to request data on the schedule of sales by the Cocoa board and at what price those scheduled exports were sold. This approach removes the lengthy discussions and confusion around exchange rates that can be wrongly forecasted by the finance team at the Ghana Cocoa Board, leading to hefty pain on cocoa farmers’ livelihoods. Again, this would not be too much to ask as cocoa is sold in US$ in the international market by Ghana Cocoa Board. Hence agreeing on the percentage of that value as the farmgate price will be a fair income distribution with a positive impact on the livelihoods of cocoa farmers.
Smallholder Cocoa Farmers’ usage of Traceability programmes to hold Ghana Cocoa Board to account
Cocoa farmers need to force Ghana Cocoa Board to implement a traceability programme to know who bought their cocoa beans, at what time and at what US$ cost. In this way, the Cocoa farmers would be able to identify those who bought their cocoa beans, double-check with them the price at which they bought their beans from the Ghana cocoa board, and reconcile it with what the Ghana Cocoa Board is saying about transparency and accountability. With this, we would not have collapsed Ghana Cocoa Board but ensured they are transparent and the cocoa farmers get what they truly deserve. KOA-Impact has introduced something similar, but I won’t go too much into it as I will publish my interview with them very soon. The devil is always in the detail though I am not pre-empting that there are flaws within their transparency programme. Their introduction of a transparency system is a good step toward ensuring a fair trade exists between them and the Cocoa Farmers they work with.
Cocoa Farmers should use their political power to drive the change they desperately need, and I am here to help as a Cocoa Farmer’s Son!
Finally, Smallholder Farmers are politically powerful. They aren’t just 800,000 in number, but with a tier average household membership of 8, they represent over a 6.4million in aggregate households. Suppose we can remind Smallholder cocoa farmers of the political power they have. In that case, they will be able to utilise it vehemently to pressure all governments to ensure their needs are met. Their numbers give them the power to decide who becomes the president of Ghana or an MP for their constituencies and the government that run the country.
It’s a WRAP!
It took me over seven months to put this research article together. I hope you enjoyed reading it. The following article took me six months to work on. It will talk about a detailed impact analysis of Mondelez’s and OLAM’s sudden entry into cocoa production, some revealing insights and how smallholder farmer groups and their producing governments can combat that. Let’s get ready for another thrilling set of articles!
The content of this publication should not be republished in any shape or form without official consent from me. You can reach out to me for publication discussions via Kwame.a.kwarteng@gmail.com. If you want the complete 5000 worded report sent to you in PDF, kindly reach out to me for a quote. If you’re going to have a chat with me over cocoa related issues or want to run your strategies with me for advice, you can email me for a quote and time.
I appreciate how the article not only highlights the problems but also provides insightful solutions and practical steps to empower farmers. It encourages a sense of unity and collective action, emphasizing the significance of collaboration between farmers, policymakers, and consumers. The article’s optimistic tone and proactive approach instill hope that positive change is possible. It serves as a reminder that by championing the rights of farmers, we can contribute to a more sustainable and equitable future for everyone involved in the agricultural industry.
I appreciate how the article not only highlights the problems but also provides insightful solutions and practical steps to empower farmers. It encourages a sense of unity and collective action, emphasizing the significance of collaboration between farmers, policymakers, and consumers. The article’s optimistic tone and proactive approach instill hope that positive change is possible. It serves as a reminder that by championing the rights of farmers, we can contribute to a more sustainable and equitable future for everyone involved in the agricultural industry.