Localising conversations on Living Income Differentials: Where is the Local Cocoa Farmer?

8 Mins read

Localising conversations on Living Income Differentials: Where is the Local Cocoa Farmer?

In 1879, Ghana planted our first cocoa tree. In the 2018–19 and 2019–20 cocoa seasons, respectively, Ghana produced 812,000 and 850,000 metric tonnes of cocoa. The entire global cocoa value chain is estimated at $100 billion. Ghana and Ivory Coast produce about 70% of the world’s cocoa beans and earn 3% of the industry’s $100 billion in revenue (this is not promised though).

For months, the Ghana Cocoa Board has been waiting for a lending facility (syndicated loan anyway) to purchase cocoa beans from farmers. How many years has the Ghana Cocoa Board been syndicating loans to purchase cocoa from farmers and export the same in the raw state? Countries are built by brains, not natural resources.

Growing up in a cocoa community, elders of the community told me that some of the wealthiest people in our society a century ago farmed cocoa. Contrarily, cocoa farmers are now among Ghana’s poorest people. The decadently high taxes that Cocoa Board levies on cocoa farmers through the producer price are used to lavishly compensate themselves at the expense of these hardworking farmers. Even though it has no cocoa trees or farms, Switzerland commands over $4.5 billion in value-added cocoa industries (mostly chocolate and related products).

Additionally, recent interactions with government agencies, businesses, non-profits, civil society groups, farmers, and farmer groups led to the impression that farmer representation is proportional to farmer capacity. This includes having the knowledge, data, and ability to have fruitful conversations on living wages with key actors in the sector.

Sadly, this is lacking among our cocoa growers, which means they have little say in market decisions. We need a paradigm shift with the cocoa farmers at the centre of these conversations. For instance, Rikolto has designed a global cocoa and coffee programme around fair living income differential as a principle.

To do this, they focus on farmer professionalisation, which helps farmers and farmer-based organisations to negotiate better prices and form more fruitful business partnerships with the corporate sector. A big part of their work with farmers is helping them to access relevant information and data that can help them negotiate with other parties. Thus, empowering farmers to have meaningful input in discussions about ensuring a global minimum income that allows them to thrive is key.

The cocoa/chocolate industry has been hunkered down for the past two years by the COVID-19 pandemic, thus last month marked the first major partnership meeting in over three years. Here I synthesised a few ideas on the issue. Brussels was supposed to host 350 policymakers, businesses, academics, farmers, and civil society representatives for the World Cocoa Foundation Partnership Meeting, but just a handful of stakeholders showed up. The two major producing countries boycotted the meeting in protest against the industry’s knock-back to pay a fair price for the commodity. Although I agree that the protest is necessary, I also think it’s only half of the actions required to highlight the unfair practices in the sector. One of the Ghanaian civil society advocates who participated in the said meeting disclosed; ‘we absolutely support our government’s action, and we also need our government to be significantly clearer about what they are doing themselves with the cocoa profits’. Here, we cannot pin the blame on just one stakeholder.

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Is recent producer price adjustment adequate to cushion cocoa farmers against rising inflation?
During the week, cocoa stakeholders talked more freely about ways to increase cocoa farmers’ income. The question is “what do we do to pay the farmers more?” This question is being asked by programme administrators, not company CEOs.

Some serious doubts have been raised as to whether a tool available on the global commodity market is the best strategy to increase farm gate pricing. There are also significant unknowns about the structure of the global cocoa market. However, many of such discussions with local businesses were on how they source their products rather than how farmers could improve their living income. How public policy may resolve Child Labour through a systems approach was highlighted using an Indonesian success case is an excellent illustration of what can be accomplished in West Africa with an effective public-private partnership to reduce the risks of child labour.

A study by the International Labour Organisation and UNICEF estimates that an additional 8.5 million children are in forced labour. The main causes of child labour are poverty, vulnerability, and inadequate social programmes. Our cocoa farmers need the backing of the cocoa industry stakeholders to tackle such a social menace.

Careful attention to the debate about how many cocoa growers need to make over the years leaves us with several propositions: from higher prices and diversification to larger farm sizes and direct cash transfers, many excellent thoughts and proposals have been presented on the subject. In most of these debates, however, farmers are not given a voice. On the rare occasions when farmers were able to take part in these conversations, it was typically the “Abidjan or Accra farmers” who spoke up, even though their opinions did not reflect those of real cocoa farmers. ‘If you try to help me out, but leave me out of it, you’re actually working against me, as Mahatma Gandhi once put it. Consequently, we face the risk of failing to reach our goal unless actual cocoa farmers are involved in these discussions.

Ghana and Côte d’Ivoire implemented the Living Income Differential (LID) in 2019 to increase the income of cocoa farmers; the LID is the price of premium cocoa on the global market. The US$400 LID is built into the price for all cocoa farmers. For instance, the price of a bag of NPK fertiliser has just increased to between 240 and 450 GHS. Price increases in inputs and farm machinery, commodity prices, and the cost of living have eventually neutralised the recent adjustment in the producer price as announced by the government. Our cocoa farmers put in long hours of labour and should be compensated more than the suit-attired Ghanaian regulator.

In the 2021–2022 harvest season, the Ghana Cocoa Board introduced a pension programme for cocoa farmers. The pension scheme was designed to help farmers in the long run by encouraging young people to enter the cocoa industry. Key stakeholders in the sector must closely police the implementation of this policy so we do not have another case of the Cocoa Board Scholarship. Last year, a non-negotiable electronic scale was installed for weighing cocoa beans. This action was taken as a part of a bigger campaign to ensure the protection of cocoa farmers. Since cocoa buyers are not permitted to tamper with the scales, the Ghana Standards Authority calibrated the scales for use.

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For cocoa farmers to make a decent living, they need to have a firm grasp of the intricacies of the market system governing cocoa prices. Increasing the price of cocoa without increasing social support services will not guarantee a living income for cocoa farmers. Businesses in the cocoa and chocolate industries are dedicated to resolving the difficulties plaguing the cocoa industry through innovations and newer approaches. Traceability will be key in the evolving environment of the cocoa business. At Africa Farmnet Limited, we have piloted our AI/GIS-powered traceability system on both grain and tree crops in Ghana. You can reach out to us to explore the scale-up of this home-grown agritech solution as part of your cocoa business.

How can regulations be recalibrated to advance fairness in the sector?
The European Union has been a vocal proponent of human and environmental rights legislation for some time now and was well-represented in last month’s WCFP meeting. The hint about changing regulation in the US offers optimism about an evolving discussion to stir a change in the global cocoa trade. However, the main point is that we should not place all the blame for poverty on farmers by ignoring the underlying system of poor governance and consumer behaviour. Besides, this time the message will need to stick. Farmers are still struggling to make ends meet, children are working dangerous jobs, and forests and cocoa farms are being degraded in Ghana through galamsey. In that instance, there is still a great deal of effort required.

The Ghanaian government has mandated that a 64-kg bag of cocoa beans cost GH800. The price of a bag of cocoa was GHS 475 six years ago. That was $122. Today, GHS 800 of a bag of cocoa is equivalent to $53.33. That’s less than a third of what cocoa sells for on the international market. Thus, cocoa farmers rarely receive this price for their cocoa beans. The first problem is that the government is frequently slow to release funds for the purchase of cocoa beans. Second, farmers still have to sell their cocoa beans regardless of whether or not the government buys them. Third, intermediaries (“cocoa krakye”) profit from the situation by offering to purchase cocoa beans at prices lower than the government-set minimum. Cocoa beans have a “farm weight” of between 65 and 66 kg per bag rather than the standard 64 kg. The weight of a bag of cocoa purchased from farmers is actually 70kg, but some buyers wittingly change their scales to reflect a lower weight. The shortage of farm inputs like weedicides and fertilisers only makes their situation worse. The Ghanaian cocoa farmer is being taken advantage of no matter how you slice it. So, when they’re selling their cocoa farms to galamseyers is a surprise to many of us.

Politicians and their friends have gained control of the Cocoa Board Scholarship Scheme. Areas, where cocoa is grown, have some of the country’s worst roads, including some that have been linked to organ dysfunction, respiratory ailments, and general road squalor. Among most of our society’s extreme poorest are cocoa farmers. Milo and chocolate are seen as expensive treats reserved for the upper class. As a matter of fact, many of them have NEVER tasted their own hard-earned results. In the Western and Western-North regions, where cocoa is grown extensively, almost 400 large households lack access to modern electricity. Yes, these are the realities on the grounds! The government of Ghana owes it to these indispensable members of our society to demonstrate its gratitude for all they do. Establish a solid foundation, and ensure all of the district and regional outposts are up and running. Their children should get priority when scholarship opportunities become available. Myself and my siblings were denied the Cocoa Board Scholarship even though our parents were cocoa farmers. A mate of mine whose father was a cocoa purchasing clerk rather got the scholarship with ease. We struggled to fund our education hence most of my siblings dropped out of school after Junior High School. The least we can do is give cocoa farmers what they deserve.

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Increasing cocoa processing in Ghana and Cote D’Ivoire.
In 1965, the Tema neighbourhood welcomed Cocoa Processing Company Limited (CPC). A limited liability company registered on November 30, 1981. The company began trading on the Ghana Stock Exchange on February 14, 2003. Two cocoa factories and a confectionery factory make up the business. The company’s cocoa liquor, butter, natural/alkalised cake or powder are intermediate products, while the Confectionery Factory produces golden tree chocolate bars, couverture, chocolate coated peanut (pebbles), VITACO and all-time drinking chocolate powder, choco delight (chocolate spread), choco bake and royale natural cocoa powder. The CPC plants are unique in that they process just the highest quality premium cocoa beans from Ghana without adding any other beans.

The CPC’s dedication to research and development has resulted in products that not only adhere to global quality standards but also consistently receive positive feedback from consumers. The company processes 65,000 metric tonnes of premium cocoa beans from Ghana annually. Can the CPC be assisted through a PPP model under the IDIF to upgrade their facilities and expand processing to meet growing demand? There are several artisanal chocolate producers across the country. Can these stakeholders join forces together, share resources and expand their processing capacities to meet growing demand?

Construction of a cocoa-processing factory costing $108 million has begun in the Ivorian city of San Pedro, by the Ivorian multinational Atlantic Group. Launched by the Prime Minister, Patrick Achi, the 9-hectare project will enable Côte d’Ivoire to process a major chunk of its cocoa produce when the factory is completed in 24 months.

The government estimates that the Atlantic Cocoa factory can handle 64,000 tonnes per year, with the potential for expansion to 100,000 tonnes in subsequent years. The target is to process all of the cocoa grown in the country by 2030. About 46 % of the world’s annual 4.8 million metric tonnes of cocoa beans come from Côte d’Ivoire. Due to the factory, it will be able to seize a larger share of the commodity’s value chain. To date, Europe has been responsible for processing 40% of the world’s cocoa output. The government estimates that 1,700 people will be employed at the plant in some capacity.




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