Bitter chocolate: Africa's cocoa farmers suffer price hikes — and more

Bitter chocolate: Africa’s cocoa farmers suffer price hikes — and more

In he Afigya Kwabre district of Ghana’s Ashanti region, people like Kingsley Owusu are known for growing Ghana’s leading cash crop. Owusu and his comminity have been growing cocoa beans for 30 years or longer.

For all these years, the cocoa harvest has enabled him to take care of his children, who all are now adults. But aged 60, Owusu now has to worry about his own livelihood.

“My production levels have gone down because of climate change and diseases. And illegal mining activities are also contributing to this,” Owusu told DW, stresing that he barely makes enough to get by.

Owusu used to produce about ten bags of cocoa per production season, but now he struggles even to make three bags, which translates to little cash.

Ghana steps in to help farmers

The Ghana Cocoa Board (Cocobod), which regulates the sector, recently announced that it would significantly increase what is pays cocoa farmers per ton.

Cocobod said in a statement that “the increase in the producer price of cocoa has become necessary to enhance the income of cocoa farmers.”

From previous rate of €1,463 (GH¢20,928) per ton, it pledged an increase of nearly 60%, paying farmers €2,316 (GH¢33,120) per ton moving forward.

This means that farmers like Owusu now receive €145 (GH¢2,070) per bag of cocoa with a gross weight of 64 kilograms.

But farmers like Owusu take issue with the government’s pricing policy.

Ghana farmers feel left out of decision-making

“Per the world price, we should be receiving more,” he told DW, highlighting that this month, the price of cocoa on the world market had reached $10,000 per ton.

The price for cocoa is chiefly determined at the commodities futures markets in New York and London, which is largely driven by supply and demand.

However, the way cocoa beans are sold is based on different standards in each country, with cocoa trading systems across Africa often being greatly varied in their structures.

In Ivory Coast, for example, which is the leading producer on the continent, farmers can sell their beans to cooperatives which they belong to — or they can directly trade with private buying companies.

But in Ghana, the second leading producer of the precious bean, there is a long-established mechanism, which limits farmers in certain ways. They cannot trade with external buyers and thus take control over their own pricing.

They can only sell their beans to the state agency, Cocobod, which then in turn trades cocoa on the global market.

Moses Djan Asiedu, board secretary of the West African Cocoa Farmers Organization, agrees with the concerns voice by local farmers in Ghana: “Cocobod is a pricemaker, and the price established beyond (the control of) the farmers. And we think that the facility that is establishing the price is not a fair thing,” he told DW.

Ghana’s centralized cocoa policy

Meanwhile, the spokesperson for Cocobod, Fiifi Boafo, told DW that when cocoa prices on the global market increase,

it doesn’t immediately reflect in the pockets of farmers.

“The increment in price (changes) at the international market is something that we get excited about — excited because this provides farmers with opportunities to improve revenue,” he explained, adding that “we do forward sales” to farmers.

Ghana’s policy of forwarding of sales prices of cocoa means, however, that producers are tied to what the government agrees on as a price on their behalf, leaving them no say in the matter.

Cocobod says that this policy is intended to allow for both the government and cocoa producing farmers to have some collectivce control over the supply and demand mechanism on the commodities market, securing future cocoa supplies to address any risks in pricing while also stabilizing the market.

But Asiedu says that this arrangement leaves cocoa producing countries like Ghana helpless in securing fair pricing for all, advocating that this must change: “There is no fairness. That is why Cocobod also agrees to (accept) whatever is given,” he said.

Asiedu, who also works with the World Cocoa Farmers Organization, says that local farmers in Ghana deserve to get more than just a fraction of the price their beans are sold for, and blames the involvement of the government in the entire production process for producers being short-changed.

“The government only (looks at) the cost involved in handling the cocoa before they offer a price for the farmers,” he told DW.

Boafo the agrees that this policy of forward-selling of Ghana’s cocoa may not present farmers with opportunies to reap the full benefits of their output — especially now that prices are up on the world market.

However, he concedes that Ghana’s policy also has its benefits, and that is has protected farmers in the past, establishing reliable rates for their crops.

Are farmers facing an untameable market?

According to Asiedu, however, Ghana might be running out of time to save the cocoa sector — as many farmers are either abandoning their businesses or retiring without having anyone to pass the farm on to.

“Most farmers, about 70%, are overaged. And they lack the strength to maintain their farms, especially if they do not get enough money … for their labor. So they abandon their farms,” Asiedu explained.

To stop this trend of quitting, both Ivory Coast and Ghana took an unusual step in 2019 to improve the living conditions of farmers: They declared that buyers of cocoa would have to pay an additional premium of $400 per metric ton of cocoa beans purchased to compensate for the changing — and ageing — cocoa labor market.

However, a new study by Oxfam, released during the World Cocoa Conference, shows that this attempt, titled “Living Income Differential” (LID), failed miserably, partly on account of the rising commodity prices.

But the LID policy also crashed in part because traders also pay a negotiated premium for cocoa based on qualities like taste, fat content or bean size, while is called the “country differential.”

“At least if (the price on the global market) came in at a certain level where the farmer would always be comfortable enough to still produce and the buyer would also be able to afford (cocoa), we could sustain this.

“But in this situation where the market is not working in the interest of the cocoa farmer, it becomes difficult for the sustainability of the industry,” he told DW.

The Oxfam study reveals that cocoa buyers simply reduced the country differentials for Ivory Coast and Ghana after these countries introduced their $400 LID to support farmers, resulting in the country differentials even turning negative.

No more chocolate?

Meanwhile, there is already another major crisis brewing in the cocoa sector in these two leading producer countries: Production levels have gone down drastically in recent years.

In the 2021/2022 crop season, Ghana produced about 750,000 metric tons of cocoa beans. But since then. cocoa production has taken a nose dive: Ghana’s cocoa output for the 2023/24 season is now expected to be down by almost 40%.

Boafo says that this shortage of beans was the trigger of the recent price, surpassing $10,000 per ton on the world market. while Asiedu explains that in addition to not fetching fair prices for cocoa beans, the sector also faces serious threats from climate change:

“We now have unsual rainfall, unusual sunshine, and sometimes you cannot predict this. We also have quite a number of (other) issues, like diseases, which farmers would have to control. And sometimes access to chemicals to combat (diseases) also becomes an issue,” he told DW.

Boafo adds that in order to fight global warming, smart farming methods need to be adopted to protect the sector:

“Climate change is a major concern. It is key that we are able to deal with the effects of climate change,” he said.

But whether the issue is climate change, commodity prices, output rates or incentives to continue the cocoa trade, it would appear that the countries that produce the precious beans don’t have much power to influence any outcome.

That power, it seems, lies with the chocolate buyers.

Author: Isaac Kaledzi, Andreas Becker