Cocoa ‘a sad story’: Farmers need insurance as human cost of industry overlooked, says Cacao for Change

By Oliver Nieburg contact

- Last updated on GMT

Social movement Cacao for Change calls for insurance protection for cocoa farmers under a new ‘shared value’ model it says should be adopted by the entire industry. Photo: iStock - Duncan_Andison
Social movement Cacao for Change calls for insurance protection for cocoa farmers under a new ‘shared value’ model it says should be adopted by the entire industry. Photo: iStock - Duncan_Andison
Cocoa farmers operate in a chocolate supply chain that perpetuates poverty and bear the bulk of the risk, claims Cacao for Change as it proposes an alternative model.

Cacao for Change is a social venture set up by campaigner Fernando Morales-de la Cruz, who also oversees a sister movement in coffee named Café for Change.

The organization says cocoa and coffee farmers should be protected by a ‘Shared Value’ model that includes insurance protection and guarantees a living income.

Cocoa farmers can’t hedge bets

“All plantations have a risk – a big risk. But companies don’t have the risk because they don’t own the plantations,” ​Morales-de la Cruz told ConfectioneryNews.

While chocolate companies can hedge on the futures market and source the commodity from other countries when an origin faces drought, disease or political unrest, farmers have no insurance cover and can suffer, he said.

“We don’t think about the human rights of the people producing our products…It’s unacceptable for the consumer,” ​said the Cacao for Change founder.

He said insurance premiums could by financed by adding to the consumer price for chocolate and would likely be less than a fraction of a cent per bar.

Consulting chocolate companies

Insurance cover is one element of Cacao for Change’s proposed model, but it hopes to work out the finer details of the shared value system in collaboration with bosses at the world’s largest chocolate firms and cocoa processors.

Morales-de la Cruz says it will require an industry-wide standard led by a taskforce of chocolate company CEOs, not only sustainability staff.

Middle-class population in a chocolate maker’s interest

CAOBISCO lobbying

lobbying - ARudolf
Photo: iStock - ARudolf

A separate campaign by Make Chocolate Fair  says it has collected 120,000 signatures it will send to  The Association of Chocolate, Biscuits and Confectionery Industries of Europe (CAOBISCO) on December 2, 2015, calling on chocolate firms to calculate a fair subsistence income for cocoa farmers and how a subsistence income will affect the price of cocoa beans.

“The cocoa bean has a sad story” ​said the Cacao for Change founder.

A shared value system is one that “respects the legal rights of everyone in the supply chain,” ​he continued, yet today many farmers live in dire poverty.

“The real solution is to create a world where everyone is in the middle class, then they can become consumers,” ​said Morales-de la Cruz.

Saving the world or market share?

He says companies should not sing their own praises in marketing campaigns touting numbers of farmers trained or numbers of communities reached by their programs while girls still struggle to attend high school and cocoa communities strain to feed their children.

“To say you are saving the world with a few thousand trees, I’m sorry, but that doesn’t feed the world….To alleviate poverty means to perpetuate it. Don’t say you are saving the world – you’re just saving your market share.”

Reductions in infant mortality, school attendance and a change in farmer income are stronger key performance indicators (KPIs), he said.

Fifty-nine of every 1,000 children born in Côte D’vore, or 6%, will not pass their first birthday, according to CIA World Factbook figures. “If children are dying, it’s not fair,” ​he said.

How much do African cocoa farmers earn?

cocoa pod beans powder

According to the World Cocoa Foundation, a typical cocoa farm in Africa is two to four hectares and normally yields between 300-400 kg of cocoa beans per hectare.
At yesterday’s cocoa prices on the New York Futures market - $3,304 per hectare – that means a typical African cocoa farmer’s annual yield from cocoa is worth between $1,982 and $5,286 per year.

Morales-de la Cruz said cocoa is sometimes the only source of income for a farmer as they don’t own enough land to cultivate other crops.

But far less than $1,982 and $5,286 will reach an African cocoa farmer’s pocket because the commodity is taxed and traders will take their cut. The figure also excludes the cost of labor, transportation, fertilizer and planting materials.
Whatever is left can be spent on food and basic living costs, such as education for children. This can add up as the world’s premier cocoa growing nation, Côte D’Ivoire, has a fertility rate of five children per woman.

Make Chocolate Fair estimates many farmers in the Global South survive on less than $1.25 a day, below the threshold of absolute poverty.

By comparison, the poverty threshold for a five-person household in the US is $27,827 a year, according to the U.S. Census Bureau.

Chocolate and cocoa industry programs as well as certification organizations such as UTZ Certified, Fairtrade and Rainforest Alliance typically offer a $150-200 premium on top of the market price for cocoa. Even with the premium that’s still $2,102 - $5,606, a year before tax and other expenses for most African cocoa farmers and their families.

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3 comments

Response: Statistics used

Posted by Oliver Nieburg,

The statistics were based on the cocoa price on the New York futures market on 26 November. It's an indicator of the value of the cocoa beans compared to average yields of an African cocoa farmer, but actual earnings could vary because it doesn't account for factors like tax and any takeaway from middlemen. The article also compares the premium for fair trade (certified) cocoa, which is usually between $150-200 on top of the market price per metric ton. But again, it's very tough to put a number on actual earnings.

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Statistics used

Posted by Susan O'Neill,

I am not opening a debate, I just do not know, are the earnings you quote for farmers in the traditional cocoa farming process or in the Fair Trade small farmer coop model?

Thank you

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Back to basics

Posted by Leonard Garden,

Thanks Oliver for taking us back to the basics and for couching the remarks of "Cacao for Change" in that reality, i.e. cocoa farmers remain poor because so much (like simple crop insurance) has yet to be facilitated in their favor. I would prefer not to look at who is to blame--the entire value chain knows much of what is needed. Can insurance be organized by cooperatives? By nations? By confectioners? By banks? Someone needs to move forward on this and other specific farm issues to render cocoa production more sustainable.

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