West Africa has six million hectares of its terrestrial habitation planted with cocoa which provides about 60 per cent of the world’s total production. Côte d’Ivoire and Ghana are its largest producers, followed by Nigeria.
In almost all these countries, the cocoa forest landscape has experienced the highest deforestation rates. A partnership emerged in 2017 among the industry, governments of Ghana and Cote d’Ivoire and the international community (the WCF, IDH and the International Sustainability Unit of the Prince of Wales) to work together to address this issue. The CFI aims to take a holistic approach to tackle deforestation head-on. But is there any evidence to suggest that what the industry and governments are proposing is going to make any impact on the problem? Can chocolate really uproot deforestation from West Africa? Have commodity supply chains been successful at achieving a deforestation-free status? The little we know is in Soy, Palm, Beef and other high deforestation commodities where the private sector has not done enough to address deforestation. I honestly wish chocolate was enough to solve the problem. Unfortunately, it isn’t. As coach Joe Paterno once said: “We shall act with good intentions, but at times we will be wrong. When we are, let us admit it and try to right the situation.”
In this new series, I will attempt to highlight the growing concern that cocoa growers and mere industry commitment, cannot uproot deforestation in the region, unless backed by actions, with significant company policy changes and real tangible, innovative and supportive approaches in the field. The urgency is even more for business and government leadership to lead, and for local people to participate in finding practical solutions on the ground.
Poverty and Deforestation
I dedicate this blog to the relationship between poverty and deforestation and why the market and government policies must incentivize and support farmers to make this change journey. I dare say unless the welfare of the farmer is placed at the centre of the cocoa and forest initiative and sustainability plans, any prescription to uproot deforestation will not yield the desired impact. Indeed, the relationship between poverty and deforestation has long been established. “Cocoa growers today receive around 6.6% of the value of a tonne of cocoa sold” that is according to Make Chocolate Fair, European Campaign for Fair Chocolate. Majority of cocoa farmers live on less than $1 a day. Cocoa farmers in the topmost producing country Cote d’Ivoire earn around 91 US cents (CFA 568) per day, according to a study by industry giant, Barry Callebaut and the French Development Agency (AFD).
This low and insecure income of cocoa farmers has increasingly led to serious social and environmental issues. Hoping to increase their revenues, cocoa farmers put more land under production, at the expense of sustainable, ecological and diversified farming. If tropical forests are so valuable to a sustainable cocoa industry, then why does the industry now confront large-scale destruction and degradation of this unique ecosystem? Backed by legislation, an industry pricing regime that transfers to producers, at least 20% of the value of a ton of cocoa sold, is what might create a pragmatic leap for farmers to exit poverty, sustain production and care for nature. There is no sustainable cocoa when farmers live in poverty. At the recent partnership meeting of the WCF in Brazil in October 2018, Ricky Scoby, the President of the WCF Twitted that “participating farmers from 5 countries in 3 continents had one and the same message: better prices and profits.” Company investment in better market prices is the best chance to end poverty.
Similarly, at the World Cocoa Conference in Berlin in April 2018, Sayina Riman who heads the Nigeria’s Cocoa Association recalled to the DW with nostalgia that "When cocoa prices were at $5,000 (€4,102) per ton in the 1980s, most of the finest houses in our communities used to be from the cocoa farmers." Many farmers are living in abject poverty, not only because cocoa prices have been falling since 2013, but mainly because prices have been low for generations. It is obvious that the current price is too low, unfair, undignified and enslaving cocoa farmers. This makes cocoa farmers bitter, outraged and trapped in a vicious cycle of poverty. I could not agree more with Souleymane Diarrassouba, trade minister of Cote d’Ivoire when he complained to the DW that "We need prices from which the farmers can make a living.”
A Thriving Business Fuelling Poverty and Deforestation
“Chocolate manufacturing is a thriving business, in which big companies make high profits.” In 2014 the total global retail value sales of chocolate confectionery reached a staggering 100 billion dollars - an increase of 20 billion from 2012 (Source: Euromonitor International). ‘Make Chocolate Fair’ insist that “While the profits of multinational chocolate companies have increased since the 1980s, the world market price for cocoa beans has declined by half (inflation-adjusted).” The companies and associated markets must work towards perfecting the market if they desire deforestation-free supply chain.
The Industry disagrees on price or at least is silent, citing anti-trust laws. But the evidence is quite clear. In 2014 when cocoa prices were souring upwards, the Euromonitor Research confirmed a widely held view that cocoa prices could be increased for farmers without impacting prices of chocolate nor significantly reducing profit margins of brands. It asserted that “The rising cost of cocoa has been touted by manufacturers as one of the biggest challenges to maintaining healthy profit margins. By 2020, some are forecasting the price of cocoa to be doubled at US$6000/tonne. If rising prices were not passed on to consumers and absorbed by the manufacturer, the manufacturer’s markup on 100g of chocolate would fall from US$0.44 to US$0.37, a decline of 16%. Yet this markup is still twice the amount that cocoa costs the consumer when they buy 100g of chocolate.” Antonie Fountain, managing director of the VOICE Network puts it succinctly, “The simplest thing a company can do is to pay farmers more. It’s not rocket science.”
Unfortunately, for many years, the cocoa industry has tried other ways to improve the condition of cocoa farmers, without requiring significant growth in real incomes. In the cocoa industry, the only ways to poverty reduction is a large-scale project requiring an unfathomable amount of capital and comprehensible only to brands and development agencies. This is a narrative that leaves little to do but despair and deferment. It is a wrong approach and we should go back to solutions that are revolutionary. We cannot save cocoa producers by playing by the same rules that have failed our generation, the rules that did not take farmers out of poverty nor kept our forests standing. We need a price revolution in the marketplace, it is urgent, and it must start now!
Fair, Decent and Realistic Price for Farmers
We can take immediate steps to drastically reduce levels of poverty, using knowledge and tools we already have available. Poverty is first and foremost encompassing material deprivation and measured in the amount of money one lives on in relation to the US dollar. The simplest, most effective, most responsible, and risk-free solution is to offer farmers a fair, decent and realistic price for their cocoa. This will enable poor people to take greater control of their own destiny, expanding their assets and exerting influence and control over their resources, including lives and natural resources. The cocoa industry can take this bold step in the market. Offering cocoa farmers decent prices for their produce can help support decent jobs, improve living conditions for producers, their families and the local businesses they buy from, and divert the youth from seeking unavailable greener pastures in the cities. This is what I define as offering a price of at least 20% of value of a ton of cocoa sold at the farm gate. I hope that progressive companies will address pricing in their individual CFI strategy.
It is obvious that while price is essential to the fight against poverty and deforestation, other company and government interventions such as the CFI, taxes and regulations, establishing community values of diverse types of capital, will all be needed to protect natural capital that is deemed vital. These are important for a holistic and comprehensive solution. However, I dare project that without transparently and creatively dealing with the pricing regime to raise real incomes, the cocoa industry cannot work in favour of eliminating hunger and food insecurity (SDG 2), child labour (SDG 8), deforestation (SDG 15), climate change (SDG 14) and the global partnership will soon fall apart (SDG 17).
Fair and Decent Price Reduces Poverty
There is growing evidence to suggest that in the long run, higher cocoa prices will reduce poverty and inequality. High market prices for cocoa will certainly be good for the cocoa farmer, in as much as high agricultural prices were good for the poor. In a recent paper, Dani Rodrik continued his unconventional thoughts on economic development and globalization: “We find robust evidence that in the long run (one to five years) higher food prices reduce poverty and inequality.” The policy implications of these findings for a cash crop like cocoa is that passing on higher prices to producers, in the short and long run is an important means of reducing poverty. Instead of looking at the relationship between poverty and deforestation as complex, the cocoa industry can do its part by perfecting the stock market regime and pay fair, decent and sustainable prices to farmers.
The agents’ choices of cocoa farmers are influenced by external factors such as prices and market outlets and conditions. In 2016, Ordway and others provided evidence of a growing influence of distant markets on land-use change in Sub-Saharan Africa. Today, cocoa appears to offer a double-edged sword. Contrary to the logic of the global food equation which suggests that yield increases take pressure off forests, local yield increases of cocoa appear to stimulate agricultural encroachment into forests. Recent higher production has seen massive encroachment on forest areas, unfortunately with declining market prices hitting hard on already poor farmers. According to recent Forest500 report, two-thirds of rainforest clearance is for land to produce commodities that are traded globally and end up in half the products in our supermarkets. This means that big corporations are responsible for fuelling this industry, as they gain profits from cocoa fields. Unless these market instruments and government policies are incentivizing to farmers and supportive to their desire to attain the SDGs, deforestation will continue.
Our farmers are observing and wondering how we wish to re-create the cocoa industry. In 2004, cocoa farmers in Ivory Coast abandoned cocoa bean export warehouses in Abidjan and torched sacks of the crop in a call for higher prices. No one can tell the next revolution or positive defiance that could change the face of the industry. But as Nelson Mandela, Former President of South Africa once said, "As long as poverty, injustice and gross inequality exist in our world, none of us can truly rest.”
The leadership of chocolate brand businesses and retailers can act to lessen the effect of deforestation.
Over the period of this cocoa season, I will be writing series of blogs about each of the challenges we face, focusing on some of the promising solutions I’m learning about and drawing lessons from other supply chains to inform the cocoa industry.