The battle between top cocoa producers and U.S. chocolate makers escalated as Ghana & Côte d’Ivoire – the top cocoa producers in the world accuse the big companies of avoiding the premium aimed to boost farmers incomes.
As we reported, Hershey’s bought cocoa from futures exchange instead of the West African countries to avoid paying the Living Income Differential (LID) premium that was introduced earlier this year.
Chocolate makers and cocoa processors had agreed to pay the West African nations a so-called Living Income Differential, effectively a premium of $400 a tonne on top of the listed price of cocoa.
The global COVID-19 pandemic has resulted in subdued demand for cocoa, depressing the market price. Hershey’s swooped in on the Futures market and purchased a large quantity of cocoa at the lower price, effectively avoiding the LID premium.
The West African cocoa regulators are now claiming Mars Inc. also changed its buying patterns for the same reasons.
Last week, COCOBOD’s CEO, Joseph Aidoo condemned the actions of chocolate companies as thwarting the attempts of their government to combat farmer poverty. They threatened to suspend the ‘sustainability scheme’ awarded to any company that it deems is not fully committed to the program.
Chocolate companies use this scheme to make sustainability claims that are important for their environmental and human rights credentials.
Now the producing countries have reportedly written to the big companies, including Olam, Mars and Hersheys, as well as four other smaller cocoa traders. in which they cite a ‘Breach of faith’as a result of the action.
The companies mentioned, were all quick to refute the accusations, pointing to the investments made by their sustainability program in the countries.
Separately, the countries wrote to Hershey, cancelling all the sustainability programs Hershey is involved in directly or indirectly, and said firms running programs on behalf of them will also be barred from operating.
Yves Kone, Managing Director of Le Conseil du Cafe-Cacao, and Joseph Aidoo, CEO of COCOBOD said,
Some chocolatiers and trade houses have adopted covert strategies to circumvent the farmer income improvement mechanism with the aim of collapsing it.
We will do whatever is within our power to protect the over three million farmers from impoverishment.
Ghana and Côte d’Ivoire have withdrawn their membership of a U.S. cocoa industry association, accusing the body of helping U.S. chocolate companies avoid paying a cocoa premium aimed at tackling farmer poverty.
A document reported by Reuters claims, The Cocoa Merchants Association of America (CMAA) is “condoning and conniving with American companies against poor West African cocoa farmers” by avoiding the premium.
Meanwhile, the world’s top cocoa producers are reviewing their membership of the Federation of Cocoa Commerce (FCC), a UK-based international organisation that aims to promote, protect and regulate the cocoa trade.