Fairtrade to increase its Minimum Price for cocoa and farmers’ Premium payments
Fairtrade International has announced today it will raise its Fairtrade Minimum Price for conventional cocoa from $2,000 to $2,400 per metric tonne at the point of export (FOB), marking a 20% increase.
The foundation also said it would increase its Fairtrade Premium, an additional payment made directly to a communal fund for workers and farmers, from $200 to $240 per metric tonne, the highest fixed premium of any certification scheme.
This is an amount on top of the selling price, paid directly to farmer organizations to spend on projects of their choice, Fairtrade said.
According to its figures, in 2017 Fairtrade cocoa farmer cooperatives earned nearly $43 million in Fairtrade Premium to invest in their communities and businesses.
For organic cocoa, the Fairtrade price will be $300 above the market price or the Fairtrade Minimum Price, whichever is higher at the time of sale. This is a change from the current minimum fixed price of $2,300 per metric tonne for Fairtrade certified organic cocoa.
The new price structure, agreed by the Fairtrade Standards Committee, a multi-stakeholder body that includes farmer and trader representatives, will take effect on October 1, 2019. The decision follows a lengthy consultation process across the cocoa supply chain with Fairtrade farmers, traders, manufacturers, and chocolate brands.
“This is good news for West Africa’s cocoa growing communities,” said Fortin Bley, an Ivorian cocoa farmer and chairperson of Fairtrade Africa’s West African Network. “Farmers have been badly squeezed by low world prices, so the higher Fairtrade Minimum Price and Premium help to level the playing field for a more sustainable future.”
New Living Income Reference Price
Fairtrade International has also established a Living Income Reference Price for cocoa in Cote d’Ivoire and Ghana, based on living income benchmarks of $4,230 and $6,700 for Ghana and Cote d’Ivoire respectively.
The Fairtrade LIRP is calculated at farm gate level rather than FOB because it refers to farm income, which is $2,668 per metric tonne of cocoa in Côte d’Ivoire and $2,300 in Ghana and is seen as closing the gap between the average Ivorian cocoa farmer income and a living income.
The Living Income Reference Price, which is non mandatory, should enable full-time cocoa farmers to earn a living income if implemented as part of a holistic strategy that also includes increased productivity and diversified crops, the foundation said.
Fairtrade revealed that its target price is based on what the ISEAL Living Income Community of Practice has calculated would be needed in each country to support the average cocoa farming household’s basic costs for food, housing, clothing, health care, education plus a small provision for emergencies, and then factors in productivity benchmarks and the cost of sustainable production.
It said the basis for the price model was also validated through a consultation process with producers, industry and civil society.
“It’s a sad truth that most cocoa farmers in West Africa are living in poverty,” said Darío Soto Abril, global CEO of Fairtrade International. “The price that farmers are paid is a critical aspect that needs to increase so that cocoa farmers can afford a decent standard of living for their families. We are committed to working together with our partners, and welcome other bold efforts across the industry to make living incomes a reality
World cocoa prices plunged by more than a third last year, and it is farmers who bear the brunt of price volatility, said Fairtrade. Fairtrade is the only certification scheme that has a mandatory minimum price, which acts as a safety net for farmers when market prices fall while allowing them to benefit when prices rise.
The current cocoa price set by the government of Côte d’Ivoire, the world’s biggest cocoa producer, is $2,124 at FOB. Fairtrade buyers pay farmer organizations the differential when the Fairtrade Minimum Price is higher.
Full technical information for implementation of the new Fairtrade Minimum Price and Premium will be provided by the Foundation in a formal price announcement in February 2019.