A direct result of the declining cocoa output in West Africa is the rising price of cocoa on the world market. Due to growing worries about dwindling supply from the area, cocoa futures prices in September reached a 44-year high.
The price increase may be a turning point for West African cocoa cultivation and policy.
Over 80% of the world’s cocoa output is produced in the West African region. Ghana and Côte d’Ivoire collectively account for over 60% of world output. Ghana’s economy, the world’s second-largest producer, is heavily dependent on cocoa.
West African nations have raised the guaranteed producer prices to farmers due to the worldwide price hike. Ghana has increased the price of cocoa that the government guarantees to farmers by two-thirds. According to the news, Ghana’s cocoa farmers would now get 20,943 cedis (US$1,837) per tonne for the forthcoming 2023–2024 season as opposed to the previous 12,800 cedis.
The price that cocoa growers receive in Cameroon, the fourth-largest producer of cocoa in the world, has increased by 25% from the previous rate of 1,200 CFA francs per kilogram to 1,500 CFA francs (US$2.50). Taking into account the single-digit inflation rate in Cameroon, this gain is even more significant than the one in Ghana. The government of Cote d’Ivoire has also announced an increase in producer prices.
I argue that the current shortages may be used to boost the position of cocoa growers as an economist who has extensively researched and written on cocoa production in West Africa. By doing this, they will be able to solve the structural issues engrained in the value chain of cocoa production. The value of cocoa beans has not increased to reflect rising manufacturing costs. As a result, farmers haven’t been able to make a sufficient living, which has caused them to engage in unsustainable agricultural methods.
West African nations should utilize cocoa scarcity as a negotiation chip with transnational firms to resolve these systemic problems. This important time must be recognized by both Ghana and Côte d’Ivoire. They must take the initiative and present the current production problems as long-term structural concerns that require remedies.
What is the change’s initiator?
Recently, Ghana’s cocoa regulatory body warned that some of the country’s farmers could not fulfill their contractual responsibilities for another season. The predicted yield of cocoa in Ghana for the planting season of 2022–2023 was the lowest in 13 years and was 24% less than the earlier predictions of 850,000 metric tonnes.
Production has decreased in Côte d’Ivoire and Cameroon, continuing a regional trend. Because demand cannot be satisfied due to decreased output, prices worldwide increase.
Both short-term and long-term causes are responsible for the decrease in cocoa production. Usually, commentators focus on the immediate factors:
Unfavorable weather
A decrease in the number of cocoa farmers, some of whom are selling their property to illegal miners, and a scarcity of pesticides and fertilizers, particularly now that the crisis has hampered Russia’s exports of potash and other fertilizers in Ukraine.
A variety of structural problems have plagued West African cocoa growing for decades. Worries about immediate issues shouldn’t overpower them. The first is the decreasing forest area available and its link to rising production costs.
Due to the disappearance of forest areas during the past two decades, farmers have started replanting cocoa on grasslands. This calls for intensive weeding around the cocoa trees regularly, trimming, the use of fertilizers, and the spraying of pesticides. The plants are also quite sensitive to illness. Increased labor expenses are the outcome of all these factors.
None of these additional costs have been included in the cost of producing sustainable cocoa. The cost structure has changed, and cocoa beans have been undervalued for many years. Farmers are looking at additional sources of income as they become more impoverished.
The amount that farmers are paid must consider the expense of growing cocoa on grasslands sustainably. Attempting to achieve this purely through market forces will fail. For instance, the Ghana Cocoa Board releases the official producer price for cocoa beans for the forthcoming cocoa season on behalf of the government each year, often around September. Based on the predicted export market price, this official pricing assumes that farmers in Ghana should get around 70% of it. The market price that results, and subsequently the producer price that follows, frequently falls short of covering the expenses of ethical cocoa farming.
The way forward
How much would it cost cocoa producers to grow cocoa beans responsibly, guarantee a livable wage, avoid contributing to deforestation, and avoid using child labor?
Farmers risk exploitation if the market price falls below this variable cost, leading to many issues that bedevil the sector.
The “living income differential” was first used in Ghana and Côte d’Ivoire a few years ago. Buyers of cocoa charged this premium on top of the market price to ensure that farmers received a stable income from their crops. The project failed despite having good intentions. It wasn’t well considered. Additionally, it happened when these nations’ market power to negotiate had decreased. A favorable time has come.
The industry’s instability gives cocoa farmers a better negotiating position. Other nations in the area, including Nigeria and Cameroon, Ghana, and Côte d’Ivoire might negotiate a better deal for their cocoa growers, assuring sustained production. These nations have various options to consider, such as supply management (using buffer stocks, export restrictions, or quotas), price premiums, and value addition.
