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Pact to aid poor cocoa farmers in danger as COVID-19 hits demand

A source at Côte d’Ivoire’s cocoa regulator, the Conseil Café Cacao (CCC), said it is not certain state marketers will be able to guarantee farmers the amount originally expected

The steepest dive in cocoa demand in a decade has thrown into jeopardy a plan by the world’s top two producers, Côte d’Ivoire and Ghana, to guarantee some two million farmers a living wage, sources within the countries’ regulators said.

Leading chocolate-makers agreed to a proposal from the African nations last year to charge the industry a premium for cocoa beans and guarantee a minimum income to farmers who earn just US$1 a day.

But the scheme, set to come into effect this October, was based on expectations that international cocoa prices would stay within average ranges. Instead, the impact of the COVID-19 pandemic on demand has driven them to their lowest in nearly two years and they are expected to stay weak for at least a year, the industry says.

“It is not certain we will be able to guarantee farmers the amount originally expected,” a source at Côte d’Ivoire’s cocoa regulator, the Conseil Café Cacao (CCC), which sets the official farmer price each season, told Reuters.

The source, who declined to be named because he is not authorised to speak to the press, said the country’s cocoa sales for next season were some 30% below average levels for the time of year.

The CCC did not respond to Reuters’ requests for comment.

A spokesman for the Ghana Cocoa Board (COCOBOD) said in a statement sent via WhatsApp that the process of determining the price cocoa farmers will get was ongoing. He added, however, farmers would still get a better price than without any premium.

Minimum wage eroded

Market weakness could appear a good thing for chocolate consumers offered discounts on the high street, but for farmers, it could mean hunger.

Already the closure of retail outlets during lockdowns to try to contain the novel coronavirus stifled impulse buying of chocolate, significantly denting demand.

Now widespread economic hardship is expected to limit sales just as the industry anticipates production will rebound when the new cocoa season starts, generating a large global surplus.

A series of meetings last year between representatives of the cocoa industry, Côte d’Ivoire and Ghana agreed a premium of $400 a tonne for all sales for the upcoming 2020-21 season, including any products sold ahead of the season’s start in October.

Because the market has suffered a sustained fall, with prices now below $2,000 a tonne, even with the premium added, the earnings of Côte d’Ivoire and Ghanaian farmers will fall below the guaranteed minimum wage.

Four sources in total at cocoa regulators for Côte d’Ivoire and Ghana, all asking not to be named, predicted the income guarantee would be missed by roughly $120 a tonne. That would mean farmers get some increase in revenue, but far short of expectations.

Looking to the government

Calculations made by Côte d’Ivoire and Ghana when the new pricing plan was agreed a year ago showed a $400 premium would allow them to guarantee farmers 70% of a minimum $2,600 a tonne target price from 2020/21 onwards, or about 20% more than they currently receive.

Farmers in Côte d’Ivoire and Ghana said they had yet to be told they would receive any less and were counting on an increase for the upcoming season.

“Life is hard for us cocoa farmers and if the price is not good, we cannot live well. Everything is expensive and you don’t earn enough to live like men. Here in the village, we survive,” Alidou Konaté, a farmer with seven hectares in Duékoué, in western Côte d’Ivoire, told Reuters.

Francis Yeboah, who has three acres in the Ashanti Region of Ghana, said all farmers had “put a lot of hope in this new pricing system” and it was up to industry and the government to make up the difference in the event of any shortfall.

“Even if the coronavirus has an impact on the market and it lowers the price, it is up to the government to find a way to maintain a high price for the poor cocoa farmers that we are. It’s not up to us to make a sacrifice but to the chocolate-makers and the government,” he said.

Fear for livelihoods

Figures from the industry offer little comfort.

An internal report from Barry Callebaut, seen by Reuters, shows the world’s biggest chocolate-maker expects a global surplus of 317,000 tonnes in 2020/21, the biggest since 2016/17, when excess supplies kept world prices below $2,000 a tonne for more than a year.

Barry Callebaut also adjusted a previously expected 85,000-tonne deficit for 2019/20 to a 6,000-tonne surplus.

The company’s sales dropped 14.3% in the April to June quarter. It expects a gradual rebound over the next three years, but it will not be enough to balance the market in 2020/21.

It is not just farmers who will suffer. Some traders fear for their livelihoods.

“I’m concentrating my efforts on saving my job. Our business is getting impacted. Small trade houses will probably go bankrupt this year,” the head of cocoa trading at a global commodities house said, also asking not to be named.

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Source
Reuters
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