Is there enough money in the cocoa supply chain?
19th Apr 2015
The latest Cocoa Barometer 2015, published by a coalition of European development and campaigning organisations, makes for interesting reading.
It looks at value distribution within the cocoa supply chain and asks whether the many sustainability developments that have sprung up in the cocoa sector are resulting in sufficient income for cocoa farmers. It focuses on Ghana and Cote d’Ivoire, which between them produce most of the world’s cocoa.
The report gives an overview of the cocoa supply chain context:
- Most cocoa farmers live in poverty and are ‘unorganised’, i.e. not in co-operatives or other organisations that can represent them and their interests.
- The cocoa supply chain is highly consolidated, with just a handful of companies controlling the processing of cocoa and the manufacturing of chocolate.
- Certification initiatives – the three leading ones by volume being Utz Certified, Rainforest Alliance and Fairtrade – now account for almost 16% of global chocolate sales.
- Companies and industry bodies also have their own sustainability initiatives, but there are few independent third-party evaluations of these.
Most of the sustainability approaches being funded by the chocolate industry, including those of the certification initiatives, focus on increasing farm productivity. It is a vision that has been most clearly articulated by Mars: increase cocoa yields, and improved income for farmers will follow.
“I’m really proud that our iconic Mars Bar brand is at the forefront of Fairtrade’s new Cocoa Sourcing Programme. It’s a crucial next step in our global commitment to certify that 100 percent of our cocoa has been produced in a sustainable manner by 2020 and it means that all three of our top UK chocolate brands now source certified cocoa, supporting farmers to improve productivity and yields and ultimately leading to improved income and better quality of life for farmers, their families and their communities.”
- Blas Maquivar, President, Mars Chocolate UK
The Cocoa Barometer report is more sceptical. After all, basic supply and demand economics suggests that increasing the supply of cocoa will result in falling prices overall.
“This could increase the dependency of farmers on cocoa and additionally lead to an oversupply of cocoa and to decreasing prices. It is at present unclear whether investing in higher productivity – leading to additional production costs for inputs and hired labour – is a functioning business model leading to higher net farm income.”
- Cocoa Barometer 2015
The report shows that productivity is an issue. Yields per hectare are lower than they could be, and farmers would benefit from training and subsidised inputs. The size of cocoa farms has also been decreasing over recent decades and the report explores the possibility that many farms may be too small to be economically viable.
But increasing yields isn’t enough if prices are too low. So what do cocoa farmers get paid?