There's an interesting short interview over on Confectionery News with Oliver Nieburg. He talks to Marina Vanin, global cocoa director at Fairtrade International, about their plans to review the pricing and strategy for Fairtrade cocoa. Fairtrade International is conducting a study in Ghana and Côte d'Ivoire to inform the review.
Oliver points out that Barry Parkin, head of procurement for Mars and chair of the World Cocoa Foundation, has said that cocoa incomes may need to quadruple to make cocoa sustainable. Marina is cautious and does not say whether the Fairtrade price and premium will rise after the review.
Barry Parkin, head of procurement for Mars and chair of the World Cocoa Foundation, recently acknowledged how much farther current sustainability efforts in the cocoa sector have to go before farmers receive anything resembling a living income.
Speaking at the World Cocoa Conference 2016, he highlighted the need to triple or quadruple farmers' incomes to make cocoa farming an attractive proposition for the next generation.
"We can double or more the yield, we can double the income - which is a good start - but it's not yet sustainable. To get to sustainable we've got to triple or quadruple the income. That's the harsh reality... to get to a living income, a level where farmers are thriving, where the next generation want to be farms, it's a big big step."
- Barry Parkin, Global Procurement Head, Mars
An international team of researchers has published a paper showing that Theobroma cacao - the cocoa tree - is surprisingly old. Ten million years old in fact.
As a result, wild strains of cocoa in South America may contain much larger amounts of genetic variation than previously thought, which bodes well for breeding more diverse varieties that can better resist diseases, pests and climate change. Cocoa, like many cultivated agricultural crops, suffers from a lack of genetic variation.
"We hope to highlight the importance of conserving biodiversity so that it can be used to augment and safeguard the agricultural sector. By understanding the diversification processes of chocolate and its relatives we can contribute to the development of the industry and demonstrate that this truly is the Age of Chocolate," says co-author Dr Santiago Madriñán of the University of the Andes in Bogotá, Colombia.
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 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?
The Fairtrade Foundation recently pubished a useful "commodity briefing" on Fairtrade and Cocoa, combining a clear and succinct overview of the global cocoa industry with a case for why Fairtrade is needed.
The broad picture it paints is one of growing global demand for chocolate, driven by rising incomes in emerging economies, increasingly outstripping available cocoa supplies. In West Africa, the productivity of cocoa farming is low, with a lack of access to finance and technology, outdated farming methods, and no incentives to improve depleted soil or replace ageing trees.
Cocoa farmers in West Africa are likely to receive 3.5 to 6.4 per cent of the value of a chocolate bar, compared with around 16 per cent in the 1980s. Over the same period, the manufacturers' share has increased from 56 to 70 per cent and the retailers' from 12 to 17 per cent. Often their children can see no future in cocoa: the average age of a cocoa farmer in West Africa is 51 years.
Trading Visions has published a Chocolate Scorecard assessing the main chocolate companies active in the UK market on their progress towards a more sustainable chocolate supply chain.
We scrutinise Kraft/Cadbury, Mars and Nestle alongside smaller players. These three companies control 83% of the £3.7bn UK chocolate market, and 43% of the £62bn global market.
Despite having all committed to clear ethical plans they contribute just £20m in total to support cocoa producers, no more than 0.1% or 0.2% of their turnover on chocolate sales.
It is quite a promising picture compared to five or ten years ago, with most companies finally investing in cocoa farmers’ livelihoods and lots of interesting things happening. But it is also evident that the big players are global giants, and they could be doing so much more.
Trading Visions will be producing the scorecard report annually to monitor the chocolate industry’s performance across a number of ethical indicators, from Fairtrade and organic certification, through to child labour and the use of controversial palm oil. We would really welcome feedback on how it could be improved.
We want to start a constructive conversation to better help campaigners and consumers understand the reality behind the all the initiatives, commitments and marketing.
'Choc Finger', aka Anthony Ward of Armajaro Holdings, has now sold the immense stockpile of cocoa he's been sitting on since July when he cornered the market by buying up and taking delivery of 240,000 tonnes of cocoa beans.
That £658 million purchase represented about 15% of global stocks and drove cocoa prices up to a 33-year high.
Kuapa Kokoo, the co-operative representing almost 50,000 small-scale cocoa farmers in more than 1,200 villages across Ghana, recently commissioned a striking bronze statue of a male and female cocoa farmer.
The statue stands on a road island in the centre of Kumasi, the second largest city in Ghana, and is a celebration of cocoa farming and its important role in Ghanaian economy and society.
Kuapa Kokoo’s managing director, Kwasi Aduse-Poku, made a speech at the inauguration of the monument to “honour our gallant and dedicated farmers whose efforts contributed in no small way to the building of our nation”.
Andrew Mitchell, the international development secretary, is in the news over revelations that he intervened on behalf of the multimillionaire cocoa dealer known as 'Choc Finger', after receiving funding from him while in opposition.
'Choc Finger' is the nickname of Anthony Ward, whose hedge fund Armajaro Holdings donated £40,000 to Mitchell's parliamentary office between 2006 and 2009. The firm donated £50,000 separately to the Conservative party in 2004.
Armajaro Holdings had been banned from trading in western Ghana, over allegations of smuggling. Cocoa is often smuggled over the western border of Ghana to take advantage of better prices in the Ivory Coast, which results in lost tax revenue for the Ghanaian government.
After Choc Finger requested his help, Andrew Mitchell phoned the British high commissioner in Ghana and his officials in his office contacted the Foreign Office to say that the matter required "urgent attention". This is despite the fact that his department is responsible for promoting development and the reduction of poverty, not promoting British business interests overseas.
The trading ban on Armajaro was then lifted.
Andrew Mitchell now faces an investigation after being referred to the parliamentary standards watchdog.
Good news for Fairtrade cocoa farmers.
FLO (Fairtrade Labelling Organisations International), the standards setting body for the Fairtrade Mark, have announced new, higher prices for Fairtrade cocoa, which will kick in on 1st January 2011.
The Fairtrade minimum price for cocoa will increase from $1,600 a tonne to $2,000 a tonne. The Fairtrade premium will increase from $150 a tonne to $200 a tonne.
The new Fairtrade minimum price is not immediately relevant, as cocoa prices are well above it, currently at around $2,800 a tonne, although prices are starting to fall again as experts predict an end to the production deficits of recent years.
But FLO expects cocoa farmer organisations to reap at least $10m in Fairtrade premium payments in 2011.
The new standards for cocoa prices are long overdue. The last review took place thirteen years ago. It is a fairly predictable and conservative increase though, roughly corresponding to inflation. $1,600 in 1997 would be worth $2,176 now.