Where Is Price In The Joint Framework Of Action To End Deforestation In Cocoa?

“I don’t know if I ought to be angry or sad” was the response of my cousin when I shared the news about COCOBOD and the Cocoa Industry in Ghana. She could not come to terms with the fact that “ COCOBOD operates on a $2-billion budget deficit due to a fall in cocoa price s”. “This is a shame, politically incorrect, and economically unethical,” she exclaimed. That is, indeed a myth for an industry that is worth over US$100 billion. Anyone who puts farmers first and cares about the sustainability of the cocoa sector should be worried about the spin in the global markets. Yet, we cannot but acknowledge COCOBOD and the Government of Ghana for maintaining the farmgate price, so that our illustrious farmers, can still be incentivized to produce in a sustainable way.

Elsewhere in the world, far away in South America, this plunge in cocoa prices has raised concerns that cocoa farmers may quit growing the raw material for chocolate, and shift to alternative crops which though illegal, are economically viable; the Bloomberg News has reported. Question is, how long can producing countries survive? how long can the COCOBOD continue operating on a deficit budget? If current production costs are between the ranges of $1,800 and $1,900 a ton, then this surely is disconcerting to all producing countries, and the current market price of $1,800 will discourage farmers, push them further into poverty and prompt them to seek better alternatives elsewhere.

As the Ghanaian President rightly said, this “ manifest injustice ” must stop and a global cocoa pricing regime that is truly rewarding to farmers, and producing countries must be restored. This is no time for hiding behind antitrust laws. The crux of the matter is that, cocoa farmers are worse off, in the face of aggravating poverty and food insecurity. This is not only a problem of the last three years. According to the European Campaign for Fair Chocolate , “while the profits of multinational chocolate companies have increased, since the 1980s, the world market price for cocoa beans has dwindled.” The lack of income is a security threat in our rural areas; undermining access to healthcare, and educational security of the household, with a potential threat of causing children to drop out of school. The overall security of origin countries is threatened as national cocoa regulators are facing huge financial and political risks of steering between higher farm gate prices and lower market prices. Ivory Coast, the world’s largest producer of cocoa, slashed its guaranteed price for cocoa farmers by 36 percent to 700 CFA francs ($1.14) per kilogram in March 2017 and this is already a political discourse in the country. Ghana is losing at least one billion dollars every year from the declining prices of cocoa on the international market. This development is also impacting projected revenue from cocoa to improve operations in the sub-sector. We should support the move by Ghana and Cote d'Ivoire to address this unfavorable cocoa pricing regime before the next crop harvest.

Amid this all-time low price, an interesting announcement emerged at the COP23 meeting in Bonn last November; that the Chocolate and Cocoa companies, along with the governments of Côte d’Ivoire and Ghana are joining forces to pledge themselves to so-called Frameworks for Action, promising that no more forest will be lost to cocoa and, forest areas would be restored. To this end, the public-private collective has agreed to “accelerate investment” in the production of cocoa so that supply is secured for the longer term. This is where my cousin is even more confused. Why do smallholder farmers enter the forest to cause deforestation? Why has companies been willing in the past to turn a blind eye to the deforestation in their cocoa purchases? While industry investment in the last few years may have contributed directly to the production and hence supply glut, there are growing evidence that current levels of deforestation may also have had a role to play in the collapsing cocoa prices, pushing farmers deeper into poverty. The interdependence among cocoa farming, poverty and deforestation comes into play. The problem of deforestation cannot therefore be resolved without tackling the underlying crises of price collapse and farmer poverty. I have maintained that price and producer organization strengthening are the two missing legs of sustainability and the earlier we pay attention and address them, the better.

Ghana experienced a major revival of its cocoa sector, with production nearly doubling between 2001 and 2003. That revival offered us an interesting lesson that pricing policy in the market is key to sustainable production and price is an incentive that rational farmers respond to. Ghana appears to have achieved a cocoa pricing policy in a marketing arrangement that did not kill the goose that lays the golden eggs; and the goose responded with incremental gains on the same piece of land. Despite all the so-called investment into farmer education in the last three decades, the world bank has said that between 1988 and 2007, West Africa lost 2.3 million hectares of forest to cocoa cultivation, which has caused serious soil degradation, water insecurity and crop failures.

Small farmers still faces challenges of decreasing productivity, degraded land and old, pest-infected cocoa trees. All these factors undermine their livelihoods – and their ability to adopt new technology and climate smart practices. Yet, the framework of action pitches camp with a focus on growing more cocoa on less land, improving access to better planting materials, and training in the best agricultural practices: solutions that my cousin would like to term as the “new wine in an old bottle” syndrome. Deforestation-free supply chain goes beyond farmer training, farm improvements and farm productivity. We need to redistribute value through the supply chain, putting more value on the FARMER FIRST approach by increasing the price of cocoa and incentivizing change.

My cousin also agrees that price alone may not resolve all the issues. Cocoa supply chain companies and brands should strive to guarantee a living income for small-scale farmers to enable them to secure a decent living for themselves and their families. It is when cocoa farmers receive a decent and dignified income that they can also pay a living wage to the workers they hire, send their children to school and provide decent lives for their families. The action plan being developed should integrate smallholder support packages that can help facilitate the programming of location-specific smallholder support systems. Actionable area that focuses on developing and implementing a dedicated sustainable funding vehicle that provide direct funding to cocoa farmers to rehabilitate cocoa trees is crucial.

The sector needs to deliver finance and on-farm support to smallholders towards a successful renovation and rehabilitation programs. Efforts to reduce deforestation in cocoa supply chains must also be supported by strengthened landscape governance and participation of farmers and their vertical integration into the governance of the sector. The actions going forward should challenge government, private sector to adopt an integrative perspective, to look beyond the forest, and build bridges that will serve the interest of the farming communities. We should aim our focus on the development of institutional governance at landscape level including multi-stakeholder platforms and networks, and financial support mechanisms to guide landscape dynamics on the ground. These efforts have price, as common denominator, embedded in them. Therefore, while momentum is building behind the joint framework of action, the all-time low cocoa prices and lack of commitment to restore and increase price in the market, remain key barriers to implementation.

Christian D. B. Mensah; Cocoa Sustainability Expert ( [email protected] )