The world’s top producers of cocoa, Ghana and Cote d’Ivoire have jointly suspended the global sale of cocoa beans until farmers get a fair price. This was announced in Accra by the two countries to a gathering of about 300 stakeholders in the cocoa value chain, comprising, traders, processors and chocolate manufacturers, reports Graphic online.
This gesture is the first of its kind by the world’s top two cocoa growers and meant to put pressure on stakeholders to adopt a floor price for the soft crop.
Currently, the producer price of cocoa stands at US$1,808 per tonne in the face of the free fall of the commodity in the international market.
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The decision is as a result of the fact that the international market price is a few dollars lower than what is being given to cocoa farmers, forcing the governments of these countries to resort to borrowing in order to settle local farmers.
Also, this forms part of efforts by the two countries, which supply more than 65 per cent of global cocoa figures, to get stakeholders in the value chain to give farmers a fair price that reflects their contribution to the sustenance of the cocoa industry.
Under the arrangement for a floor price, the two countries have agreed that none of them will sell their produce in the international market below the agreed minimum price.
In recent times, the price of cocoa at the international level has depreciated by some 40 per cent, resulting in the International Monetary Fund (IMF) calling on Ghana to also reduce the producer price paid to its farmers.
Last year, Bloomberg reported that these farmers make “only about 5.5 per cent of a global supply chain worth more than $100 billion”. This is even less than the 15% governments take as value-added tax on the sale of chocolate products in Western countries where chocolate is most consumed.
So why do Africans who work so hard make so little from their efforts?
At a basic level, most of chocolate’s value is added from its processing and marketing. This means that cocoa processing companies like Nestle take the bulk of the industry profits, reports Face2Face Africa in 2018.
Moreover, cocoa traders, processors, exporters and manufacturers all demand a share of the revenue. As CNN explains, “cocoa bean farmers are at the bottom of a global supply chain that stands ‘firmly against [them].’ Because the traders, processors, exporters and manufacturers all sit above farmers on that chain and demand a profit margin, farmers have little bargaining power and receive the bare minimum for their product”.
The price of cocoa is indeed fixed by the governments of these two respective countries. To get to the world market, their prices must be competitive, and as one farmer, Francis, in Cote d’Ivoire says, the “price is too low; the trees are old and diseased; [and he and his cooperative] can’t get finance to invest for the future”.
Cognizant of these issues, Cote d’Ivoire and Ivory Coast said they would want to do more:
“To regulate global supply and grab more of the profit from the chocolate-making value chain, Ghana and Ivory Coast say they’ll coordinate production levels, bring their sales policies closer together and make sure that more of the crop is processed locally before it’s shipped out. They’ll also build warehouses to hold surplus beans and increase spending on marketing in an effort to boost consumption of the chocolate ingredient in their own region and in other emerging markets,” Bloomberg reported last year.
So far, their efforts have not yielded great results. Although the two countries tried to collaborate on price in 2017, they ended up going their separate ways. The countries have found it difficult to predict and control cocoa bean output. Moreover, stockpiling is costly and difficult especially in the hot and humid climate of West Africa. Nature also takes its course each year on tree production, unlike oil.
Issues like child labor, illegal planting in forests, smuggling, and diseases affecting cocoa trees all compound the effectiveness of government intervention in this area.
Although cooperation between the two countries on cocoa production, processing, and marketing and sales strategy won’t be easy, it is well worth the effort. Bloomberg reported in 2018 that cocoa was the best performing commodity, and as chocolate demand booms in emerging markets like India and China, and the middle class in Africa grows and begins to demand richer chocolate products, it behoves Cote d’Ivoire and Ivory Coast to continue to try to improve their standing in this market.
Note: video in French but subtitles are in English.