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'Fair Pay For Chocolate' Plan Fades

FILE: Farmers break cocoa pods at a cocoa farm in Soubre, Ivory Coast. taken Jan. 6, 2021
FILE: Farmers break cocoa pods at a cocoa farm in Soubre, Ivory Coast. taken Jan. 6, 2021

SAN PEDRO, IVORY COAST - More chocolate than ever is eaten globally, but a flagship program launched in 2019 that promised a living wage to growers in top cocoa producers Ivory Coast and Ghana has left many worse off, data and interviews with growers, traders and industry experts show.

Eleven industry experts blamed the situation on surpluses that have kept cocoa cheap globally, as well as on chocolate companies, global commodity buyers and intermediaries in the field seeking to protect margins. They cited inherent flaws in the government program, including a lack of supply management.

The failure of the living wage scheme to boost or even protect farmer incomes is a blow to global efforts to make the production of chocolate bars more ethically sound after years of promises to purge the industry of child labor, poverty and rampant deforestation.

Two campaigners and a trader at a large commodity house estimated around a third of Ivory Coast's cocoa farmers were paid less than the government-set floor price despite the living wage scheme, or "Living Income Differential" (LID).

Ivory Coast and Ghana introduced the LID scheme with the backing of cocoa and chocolate majors including Hershey, Barry Callebaut and Cargill.

The countries together produce two-thirds of the world's cocoa and trade it through government marketing boards. They hoped the $400 premium would increase their tax intake enough to build up rainy day funds, enabling them to set an official farmgate price sufficient to guarantee farmers a living income even when global prices fell.

But when the COVID pandemic cratered demand, global cocoa prices plunged before they built up a cushion. The two countries were unable to raise the farmgate price to the targeted levels, despite the premium.

Since the LID scheme began in 2019, the official farmgate price has only touched Ivory Coast's living income target of 1,000 CFA/kg ($1.66/kg) once - for the main crop of 2020/21, data collected by Reuters showed.

The LID has also largely failed to achieve a goal agreed with the industry for a minimum $400-a-tonne living-wage premium over global cocoa prices, after global buyers responded by pushing down a separate, "country premium" traditionally paid for West Africa's high quality cocoa.

Ivory Coast's cocoa authorities acknowledge that some intermediaries do not pay the "farmgate" price, set by the government twice a year, but did not respond to a request for an estimate of the scale of the problem.

Nestle and Hershey said they paid the LID premium. Lindt & Sprungli, Ferrero and Mars said paid the LID plus more through their own sustainability programs.

Mars said that "pricing alone isn't the answer" and that "new ways of thinking" were needed to close the living income gaps for farmers. None of the companies responded to questions about eroding the separate country premium after LID's introduction.