Last year Ivory Coast and Ghana, the world’s top cocoa producers, chose to introduce a $400 a tonne Lid on the cocoa sales for the 2020/21 season. The two nations said the premium was necessary for them to combat farmer poverty. When the coronavirus pandemic hit last year, farmers started leaving the industry, and business halted. The pandemic threatened to cause an economic crisis in the West African nations. Coupled with the declining income in cocoa farming and environmental degradation, cocoa farmers worried the business was no longer profitable. With farmers leaving, cocoa beans’ industry supply would decrease. Furthermore, chocolate manufacturing would become more expensive.
Top Cocoa Producers worry over Increase Poverty.
To solve the poverty problem in Ghana and Ivory Coast, Hershey Company, one of the world’s largest chocolate manufacturers, decided to refuse to pay the premiums and solve the situation differently. The company gets all its cocoa from Ghana and the Ivory Coast to manufacture chocolate. To ensure the long-term availability of cocoa and stop poverty, the company started the Cocoa for Good Initiative. The initiative involved a package of environmental measures intended to improve cocoa farming sustainability. In the package, farmers would receive assistance to diversify their crops, provide them with more income sources, and strengthen their economic sustainability.
The Hershey company provided the Cocoa for Good Initiative with $500 to help cocoa farmers. The funds would go into sustain farming communities in Ghana and Ivory Coast all through 2030. The company believed helping the small family-run was necessary as they produced around 95% of cocoa beans. Through their investment, Ghana and Ivory Coast families would improve their nutrition and eliminate child labor from their supply chain. Moreover, the farmers would acquire a means to increase their incomes. By providing the funds, the Hershey company hoped farmers wouldn’t stop farming cocoa beans. Furthermore, the company sought to ensure communities that cultivate cocoa remain unharmed and acquire what they need.
Ghana and Ivory Coast need to join Forces.
But even with the tremendous help of the Cocoa for Good Initiative launched by Hershey, cocoa producers Ivory Coast and Ghana were not happy with its decision to avoid paying the cocoa premiums. Because of this, Ghana and Ivory Coast canceled all of Hershey’s cocoa sustainability schemes in their countries. Additionally, the two countries teamed up and declared they would terminate their membership with the U.S cocoa industry association. The nations said they decided as the U.S run body helped companies like Hershey avoid paying the Lid.
This year Ghana and Ivory Coast realized that they need to control supplies and join forces with other producing countries to achieve higher prices. They acknowledged that in their pursuit of attaining control of cocoa supplies, the plan could fail if other producers increased output.
Ghana and the Ivory coast produce only 65% of the worlds cocoa. Because of this, they are still price takers, but if they produced 90%, they wouldn’t be price takers. This means that they will need to join forces with more producers for the two countries to uphold their new cocoa prices. Some producers like Cameroon, Nigeria, and Ecuador did not participate in Ghana and Ivory Coasts scheme. Their cocoa is still both cheaper than the top growers and plentiful, given surplus global supplies.