Ivory Coast, the world’s largest cocoa producer, is facing a standoff with multinational chocolate companies over the premium it charges to improve the income of its farmers. The West African nation, along with neighboring Ghana, accounts for about two-thirds of the global cocoa supply. However, cocoa farmers in Ivory Coast earn less than a dollar daily, far below the living income benchmark of $2.51 per day.
To address this issue, Ivory Coast and Ghana introduced a Living Income Differential (LID) of $400 per tonne in 2019, increasing the price of cocoa beans sold to chocolate makers. The LID aims to ensure that cocoa farmers receive a fair share of the profits from the chocolate industry, which is worth over $100 billion annually.
However, the LID has faced resistance from some chocolate companies, demanding a reduction in the premium amid a supply glut and weak demand due to the COVID-19 pandemic. The companies have also been sourcing cocoa beans from alternative origins, such as Ecuador and Cameroon, where prices are lower.
The dispute has escalated recently, as Ivory Coast has struggled to sell its cocoa export contracts for the 2024/25 season, which starts in October next year. The country’s cocoa regulator, the Coffee and Cocoa Council (CCC), said it has started selling the contracts at the current market price, but the companies have asked for a negative origin differential, which would effectively lower the price of Ivorian cocoa.
The CCC has rejected this request, saying it would not compromise on the LID or the origin differential, essential for improving the livelihoods of its 800,000 cocoa farmers. The CCC also accused some companies of breaching their contracts by refusing to pay the LID for the current season.
The standoff has raised concerns about the sustainability of the cocoa sector in Ivory Coast, which is already facing challenges such as aging trees, pests and diseases, climate change, and deforestation. According to the CCC, the country’s cocoa production is expected to drop 25% this season due to poor weather conditions.
The situation has also drawn attention to the need for more transparency and accountability in the cocoa value chain, as well as more collaboration between producing and consuming countries to ensure a fair and stable market. The International Cocoa Organization (ICCO) has called for dialogue and cooperation among all stakeholders to resolve the impasse and support the LID initiative.
The LID has been supported by some chocolate companies, such as Mars, Mondelez, and Lindt, who have committed to paying the premium and investing in sustainability programs in Ivory Coast and Ghana. Some consumers have also expressed their willingness to pay more for ethically sourced chocolate that benefits farmers and protects the environment.
The cocoa sector is vital for Ivory Coast’s economy and social stability, accounting for about 15% of its GDP and 40% of its export earnings. It also provides employment and income for millions of people in rural areas. Therefore, finding a solution to the current crisis is crucial for ensuring the long-term viability and prosperity of the industry.
Source: GhanaWeb
