The drop in price comes after the governments of Côte d’Ivoire and Ghana, which produce two-thirds of the world’s cocoa, implemented a Living Income Differential (LID) of $400 per tonne on all cocoa purchased from farmers from October 2020. Fairtrade said the LID is intended as a step toward a living income for cocoa farmers, recognising that low global cocoa prices have historically trapped farmers in poverty.
With the announcement of a 25% reduction in the farm gate cocoa price set by the Ivorian government for the next six months, the situation is looking bleak for farmers.
A backlog of unsold cocoa from the October 2020 to March 2021 period has been attributed to reduced demand due to the COVID-19 pandemic, with reports from the region claiming some buyers had reacted to the LID by reducing stocks or seeking out cheaper cocoa from other sources.
For its part, Fairtrade said its certified cocoa cooperatives will earn the Fairtrade Minimum Price for their Fairtrade sales during this period, since the government-set price has dipped below it.
According to Fairtrade International, a living income commitment by chocolate-consuming countries would complement the Ivorian government’s efforts to stabilize the price of cocoa for farmers.
Jon Walker, Senior Advisor for Cocoa at Fairtrade International, said: “It’s not clear how much of the decline in price is due to the pandemic, and how much was due to some buyers reportedly seeking to avoid the LID. But what’s clear is that farmers lose out. While some buyers have explicitly supported the LID, it’s not clear if all are.
“The LID is a powerful intervention by the Ivorian government that seeks to provide stability and improvement to all farmers’ livelihoods, which we have supported from the beginning. There needs to be a level playing field, and the human rights due diligence legislation under discussion in the European Union and member states provides just such an opportunity. If the human right to a living income cannot be recognized, then how will all other human rights of cocoa farming families be met in a sustainable way?”
EU Cocoa Talks
The European Commission is holding a series of multi-stakeholder talks on sustainable cocoa to feed into relevant ongoing Commission initiatives, including on due diligence and deforestation. Human Rights Due Diligence proposals are expected in from the European Commission in 2021 alongside a proposal that may specifically name cocoa on reducing deforestation.
In a recent virtual seminar session with key industry figures, the European Cocoa Commission also agreed that the EU and producing countries “should conclude partnership agreements to ensure that an enabling environment across the whole cocoa sector will be reached.”
“The price that cocoa farmers earn is not the only element necessary for their families to reach a living income, but it is an essential one. Whether the European Commission addresses living income by directly recognising price or indirectly through the incorporation of living income in human rights due diligence, the subject must be addressed,” said Fairtrade’s Walker.