Minimum pricing

Ghana and Côte d'Ivoire halt sales of cocoa beans, both demand new minimum price for farmers

By Anthony Myers contact

- Last updated on GMT

Pic: GettyImages
Pic: GettyImages

Related tags: Cocoa, Ghana, Côte d'ivoire

The world’s two largest cocoa producers want to set a minimum price of $2,600 MT to allow farmers a decent living wage.

Ghana and Côte d'Ivoire, the world’s largest cocoa producing countries, have suspended forward sales of cocoa beans for the 2020/21 season, calling for a minimum price of $2,600 per metric ton (MT). Current market prices are approximately $2,124/MT for cocoa beans.

The move was announced Wednesday as buyers and sellers prepared to discuss a minimum price proposal, industry sources told Reuters.

Cocoa prices have plummeted by 30% in recent months, due to over production and the two countries have been hit hard.

Oliver Nieburg, an analyst for Lumina Intelligence Sustainability​, said: “It’s a bold move to provide protection against volatile cocoa prices, which fell sharply in 2017. ICCO monthly averages of daily prices have only been above this rate once since November 2016.

Extreme poverty

“Cocoa is a crop synonymous with extreme poverty in West Africa 15 years on from voluntary private sector sustainability efforts that have achieved minimal impact on helping people earn more than $1.90 a day. Governments are now stepping in.

Fairtrade has welcomed the announcement. Jon Walker, Fairtrade International’s senior advisor for Cocoa, told ConfectioneryNews: “We believe in sharing the benefits of trade more equally, and welcome this move by the governments to shore up cocoa farmers’ incomes​. We will be actively engaging with the cocoa regulatory bodies in each country to understand how the Fairtrade structure, including our minimum price, will fit in with their plan​.”

Following an extensive global consultation process, Fairtrade International last year announced that, as of October 1, 2019, the Fairtrade Minimum Price for conventional cocoa would increase by 20% to $2,400/MT, with additional increases for organic cocoa. The Fairtrade Premium for cocoa farmers and their cooperatives will also increase by 20% to $240/MT.

Representatives from Côte d'Ivoire’s Cocoa Council (CCC) and Ghana’s Cocobod met in Ghana’s capital Accra to discuss farmers’ living standards. The governments are proposing a common floor price meant to address farmer incomes, which they complain are extremely low relative to the money made by big cocoa traders.

The two countries agreed to coordinate their farmers’ prices for cocoa last year​ in an effort to exert more influence on international prices.

'Historic'

After the meeting broke up, Joseph Boahen Aidoo, Cocobod’s chief executive, adressed local media. "What happened these two days is historic. For years, it is the buyers who determine the prices. To try to reverse the trend, the Ivory Coast and Ghana have suspended sales of crop 2020/2021 until further notice to prepare for the implementation of this minimum price​."

Nieburg also raised the prospect of the move having a counter-effect on the West African countries. "There is a risk such price setting may shift buyers’ attention to Latin America,” ​he told ConfectioneryNews. 

Another meeting between the CCC and Cocobod is scheduled take place on July 3 in Abidjan to discuss the pricing issue.

“On the face of it, cocoa communities could benefit, but much will depend if farm gate prices also increase. It should be down to the governments to prove farmer incomes improve as a result and the promised investment in rural infrastructure is realised," ​said Nieburg.

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2 comments

Enforcement and implementation of Pricing/Marketing strategy on the ground esp. in Ghana

Posted by Jorg Hilgers,

The private corporations along the value chain hold their breath and - I guess - many other, not-for-profit stakeholders esp. in Europe do commend this move. To me, the lackmus test will be - as David Habeyech said - the improvement of growers' livelihoods and whether or not this will be a step towards what is coined 'living income' of farmers. Much more is to be done on the ground to realize such which is beyond the control, and also the mandate, of any cocoa trader or chocolate producer.
To me, the right step to the market would be thsat COCOBOD anounces a step-by-step increase of the farm gate price so to balance inflation in Ghana, at least, and then see what "the market players" do, but strictly stick to this strategy together with CCC in Cote d'Ivoire.
Will Ghanaian lawmakers and the Finanance Ministry accept the risk of less national income from foreign trade sales due to withholding cocoa from international markets? Will the authorities compensate the farmer who need any Cedi from sales in case the floor price level won't be met by buyers? Will they control smuggling & informal trading backed up by local elites and still check whether farmers - who suffer in parts from adversary weather conditions now - can survive; and not just survive but grow and feed their kids and send them to school??? This is just a bit of what would be needed to make family-owned cocoa farming survive in Ghana!

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I support the idea

Posted by DAVID HABEYCH,

If there is a real implication on improvement of life for the growers will happen, I fully support the idea to increase the prices. Le Maître chocolatiere remain with a big chunk of the profit due to the goodwill, while the raw material areas are getting poorer and poorer. This is a good move towards sustainability, social equity, and real fair trade!

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