The West African nations last week proposed a minimum price of $2,600 per tonne of cocoa beans and suspended forward sales for the 2020/21 season until this floor price is implemented.
Speaking to Lumina Intelligence’s Sustainable Food & Drink Podcast, Sako Warren, secretary general of the WCFO, a 800,000-strong member organization of smallholders and farmer groups, said: “We believe that farmers should be the ones to communicate with their partners on what price they should sell their crop.
“We don’t think having a fixed ceiling is the answer.
“…We are more concerned about how farmers will get that money.”
ICCO expected $3,000
The International Cocoa Organization (ICCO) - a member organisation for cocoa consuming and producing countries, was not part of the floor price discussions.
But also speaking to the podcast, Michel Arrion, executive director of the ICCO, welcomed the move and said he would have expected a higher price.
“I was more expecting something around $3,000,” he said.
The new ICCO executive director, who was appointed in October 2018, said world market prices had declined dramatically since 1972 from around $15,000 per MT to $2,400 today.
“There’s nothing wrong in saying we need an increase,” he said.
“If a farmer produces one ton of cocoa per year the average income will be $2,400 a year, so it’s $200 a month which is well below the poverty line if you consider the cocoa grower is feeding seven or eight people in the household.”
Arrion hopes the minimum floor price will lead to an increased farmgate price that would support farmer income.
‘A manifest injustice’
Warren said any additional money from the minimum floor price should go to farmers as income rather than be invested in infrastructure.
WCFO’s press release is available in full below.
The president of Ghana said in a press release the minimum price protection aims to address “a manifest injustice”, a $100bn chocolate industry where less than 5.75% of the value goes to the hard work of farmers, who often live in poverty.
WCFO calls for the world price for farmers
WCFO suggests farmers should receive the floor price for cocoa rather than the farmgate price.
Côte d’Ivoire’s farmgate price for the main crop last year equates to $1,281 per MT – representing 58% of the average world market price ($2,207 - Average of ICCO’s monthly averages of daily prices from October 2018 to end of March 2019).
In Ghana, the farmgate price for the main crop was $1,407 per ton or 64% of average world market prices over the period.
“Farmers are the business people who produce what they produce and have to sell it. So why should they have the farmgate price and not the actual price?” Warren asked.
WCFO is calling for governments to tax farmer income rather than set farmgate prices.
“When farmers are better off they will improve the economies of their countries,” said Warren.
Cocoa economies
Cocoa is a big contributor to the Gross Domestic Product (GDP) of Ghana and Côte d’Ivoire.
Cocoa beans – excluding cocoa butter, power and finished chocolate – generated $3.8bn for Côte d’Ivoire in 2017 making it the country’s top export, accounting for 37% of exports by value, according to OEC figures.
In Ghana, cocoa beans are the third largest export by value, making up 10% of exports or $1.8bn.
Next steps
WCFO will publish a roadmap on how farmers can be part of discussions at its conference, the Second Global Cocoa Farmers Conference (GCFC2), which runs from 25 to 26 September 2019 in Abidjan, Côte d’Ivoire.
The Ghana Cocoa Board (Cocobod) said in a press release, a technical meeting will be held on 3 July 2019 in Abidjan to fine tune how the floor price will be implemented.
The release added other issues, such as traceability, the environment and child labour will be decoupled from floor price discussions.
We’ve contacted Cocobod for its views and are awaiting a response.
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Listen to Lumina's Sustainable Food & Drink Podcast - Episode One.
