IVORY COAST BATTLES CHOCOLATE COMPANIES TO IMPROVE FARMERS’ LIVES

In October, Ivory Coast and Ghana – which supply 65 percent of the world’s cocoa – boycotted an industry meeting in Brussels, a sign that they will no longer sell the commodity at unfavourable prices.

Cocoa farmers extract cocoa beans at a plantation in Ivory Coast [File: Sia Kambou/AFP]
In 2020, both West African countries introduced the Living Income Differential (LID) – a $400 premium placed on every tonne of cocoa transferred directly to the smallholder farmers. The chocolate companies pay the premiums to traders that purchase the beans from large collectives dotted around the country. The collectives gather the harvest from local farmers, adding the premium to the price.

However, despite accepting to pay the levy, some chocolate companies quickly found ways to avoid it. Media reports alleged that American chocolate giant, The Hershey Company, bought 30,000 tonnes of cocoa via the United States futures exchange, ICE, in a bid to avoid paying the LID; however, this could not be independently verified.

Chocolate companies usually buy cocoa directly from the source, but if they buy the commodity on the secondary market, through an exchange, they will not have to pay the associated premiums.

Two years since the premium came into effect, Yves Ibrahima Kone, the director general of Le Conseil du Café-Cacao, the national regulator which introduced the LID, said that in reality, “no one [the chocolate companies] wants to implement it”.

‘They will have no choice’

In Ivory Coast’s cocoa region, knowledge of the premium varies depending on whom one speaks with.

“We have never heard of the LID,” said Lobou Doudou Honore, the chief of a small cocoa farming village called Gripzao, north of Soubre. The chief is the spokesman for around 60 cocoa farmers, each of whom tends plots of varying sizes around the village. He says every single person in the village relies on cocoa as a primary source of income.

“Our buyers are Tony’s Chocoloney, Mondelez and Ferrero,” said Doumbia Assata Kone, director of the Meagui cooperative. The forward-thinking director is trying to encourage farmers to engage in other sources of income-generating activities, like making honey.

However, authorities say the latest strategy used by companies to avoid paying the LID is by not paying another charge known as the origin differential – a premium set according to the country of origin.

If traders do not pay the origin differential, they can claim to pay the LID but in reality, the price is the same as if no premium were added. The LID was set by Ghana and Ivory Coast but the origin differential is a premium determined by the market based on quality and provenance of the beans.

A farmer holds cocoa pods on his farm in western Ivory Coast [File: Luc Gnago/Reuters]
“This is what the chocolate companies are currently playing with,” said regulator Kone, who travelled to Rome in September to tell manufacturers that Ivory Coast would no longer sell cocoa at a negative origin differential for the first time in three years. There has not yet been an official response from the industry.

Early reports suggest that global commodities trader Cargill, which processes and distributes grains, oil and vegetables among other agricultural products, bought 25,000 tonnes of cocoa with a positive income differential for the 2023/2024 season, and it is hoped others will follow. This should have a positive impact on the money that farmers receive at the end of the supply chain.

Yet, industry insiders believe that Ivory Coast will continue to face stiff opposition from chocolate companies which can generate more annual revenue than the entire African country.

‘Reduce the supply, increase the demand’

Paul Schoenmakers, head of impact at Dutch chocolatier Tony’s Chocolonely, said most chocolate companies have plenty of room to redistribute wealth further down the supply chain.

“The bigger players in the chocolate and cocoa sector could easily pay farmers more, dilute some of their margins and still make a decent profit,” he said. “In the end, it’s a matter of choice, whether you want to maximise your profits at the expense of extreme poverty.”

In fact, Tony’s Chocolonely is paying 82 percent more than what the government is asking in an effort to fairly compensate Ivory Coast’s farmers – and it still makes a profit. Schoenmakers said that the chocolatier “pays much more” than the LID, taking into account recent increases in the costs of living and farming.

A worker carries a bag of cocoa in the Ivory Coast, the world’s top cocoa producer [File: Luc Gnago/Reuters]
For farmers to make a decent living, Le Conseil du Café-Cacao says that cocoa must be sold at a minimum of $2,600 per tonne. This would give farmers a 13 percent margin to recuperate costs and make a small profit.

However, cocoa is currently trading at around $2,300, meaning that even with the addition of the LID, the farmers will only just make a fair wage. Analysts say the price of cocoa has declined over the course of the pandemic due to reduced demand for chocolate – putting further pressure on farmers’ incomes.

In response, Kouassi said Ivory Coast is artificially limiting its cocoa supply to try and keep prices high.

The drastic measure reflects a growing sentiment among Ivorian and Ghanaian authorities that heavyweight cocoa producers will no longer be forced to sell the commodity at unfavourable prices by foreign companies.

The African producers have been emboldened by the recent possibility that Nigeria and Cameroon – which together represent around 15 percent of global cocoa production – will join the Côte d’Ivoire-Ghana Cocoa Initiative (CIGCI), a formal partnership to represent the interests of both countries.

If this happens, chocolatiers will have even less room to manoeuvre as the four African countries will account for 75 percent of the world’s cocoa production. The remaining 25 percent mainly comes from Indonesia, Brazil and Ecuador, among others.

“Two-thirds is not nothing,” said the minister, referring to the amount of cocoa beans Ivory Coast supplies the world market. “If you refuse to pay the LID, we will refuse to sell.”

By Tom Collins