Chocolate makers face ultimatum over pay for poor cocoa farmers


CHOCOLATE makers are facing an ultimatum - either support a contentious plan to raise the pay of impoverished farmers, or risk a halt to programmes that sustainability-conscious consumers increasingly demand.

West African neighbours Ivory Coast and Ghana, where more than 60 per cent of the world's cocoa is grown, are becoming frustrated by the slow uptake of a strategy adopted in July to levy a US$400-a-ton premium to help improve growers' pay. Last week, they threatened to suspend programmes that chocolate makers rely on to certify that their beans are not grown in protected forests or with the forced labour of children.

Chocolate makers cannot claim that they're sourcing cocoa sustainably and, at the same time, hold back their support for a plan that will considerably improve the livelihoods of small-scale producers, said Yves Kone, the managing director of Ivory Coast's industry regulator, Le Conseil du Cafe-Cacao, known as the CCC. The sustainability programmes only serve a small number of farmers, while the new price mechanism will benefit all growers, according to the CCC.

"We cannot pretend that we are working with the farmers, investing in sustainability and refusing to pay the farmer," Mr Kone told reporters on Friday in the commercial hub of Abidjan. "Sustainability is also paying farmers and working together."

Ivory Coast and Ghana's price plan is designed to raise the average price for their cocoa from next October to at least US$2,600 per ton, of which farmers will be paid about 70 per cent after deducting costs. New York cocoa futures for delivery in December have averaged US$2,372 per ton so far this year.

Analysts are questioning whether the plan will work because companies aren't able to hedge the premium. The incentive of higher income will also entice farmers to grow more than what the market may need, often on land cleared in protected areas, and destabilise prices further.

Ivory Coast had 16 million hectares of forests in 1960, but this has fallen to three million hectares in 2018. Ghana is losing its forests at a faster pace than any other country in the world, according to Global Forest Watch.

"The problem here is they're going to encourage more production of the bad kind," said Edward George, an independent cocoa expert. "There's a real danger of overproduction and also unsustainable and damaging production." Without the sustainability programmes, chocolate brands cannot guarantee that the cocoa they buy is not impacting protected areas and grown without child labour, said Sergey Chetvertakov, an analyst at IHS Markit's Agribusiness Intelligence. "Such statements are demanded by consumers."

Some chocolate makers have already pledged to buy cocoa at the premium rates.

"We are absolutely committed to both buy with the living-income differential and to invest in our sustainability projects," Mars Inc said by e-mail. "We will comply with the new programmes put in place," according to Hershey Co.

The cocoa regulators are reviewing all certification and sustainability projects for the current season and make an announcement on their "continuation or discontinuation" at a World Cocoa Foundation Partnership meeting scheduled later this month in Berlin.

Such programmes continue to be successful in helping farmers to improve their income "without political interference", said Eric Bergman, a commodities broker at Jenkins Sugar Group Inc. Their suspension as a way to enforce the new price plan "is a short-sighted way of attempting to help farmers". BLOOMBERG