Cocoa: Prices soar, growers in trouble – Fears in the market ahead of Easter – Newsbomb – News

The price of cocoa on the world market soared to a record high in April, but African farmers are struggling to make ends meet. In countries like Ghana, the local pricing system has left many frustrated and desperate. In the Ashanti region of Ghana, people like Kingsley Ogusu are known for growing the country’s top crop. He and his community have been growing cocoa beans for over 30 years.

For many years, harvesting cocoa had enabled him to take care of his children, who are now adults. But now, in his 60s, he worries about his livelihood. “My production levels have declined due to climate change and disease. And illegal mining activities also contribute to that,” he told DW, adding that he barely makes enough to get by.

Ogusu used to produce about 10 bags of cocoa per season but now struggles to fill even three bags. As a result, he has much less cash on hand than in the past. The Ghana Cocoa Board (COCOBOD), which regulates the sector, recently announced that it will significantly increase the amount it pays cocoa farmers per ton. COCOBOD said in a statement that “the increase in the price of cocoa production has become necessary to boost the income of cocoa farmers.”

Farmers in Ghana feel they have been removed from decision-making
“Depending on the world price, we should be getting more,” he told DW, stressing that this month, the price of cocoa in the world market reached 10,000 dollars per ton.

The price of cocoa is determined mainly in the commodity futures markets in New York and London, which are largely regulated by supply and demand. However, the way cocoa beans are sold is based on different standards in each country, with cocoa marketing systems across Africa often differing greatly in structure.

In Ivory Coast, for example, which is the continent’s leading producer, farmers can sell their seeds to cooperatives they belong to, or they can deal directly with private buying companies. But in Ghana, the world’s second-largest exporter of the precious seed, there is a long-standing mechanism that constrains farmers in a number of ways. They cannot deal with external buyers and therefore they do not control their own prices.

They can only sell their crop to the government agency COCOBOD, which then trades this product on the world market. Moses Jan Asientu, board secretary of the West African Cocoa Farmers Organisation, agrees with the concerns expressed by local farmers in Ghana: “COCOBOD is a price setter and the price set is beyond the farmers’ control. And we believe that the facility that determines the price is not fair,” he told DW.

Are farmers facing an untamed market?

According to Asientu, Ghana is running out of time to save the cocoa sector as many farmers are either leaving their businesses or retiring with no one to inherit their farm. “Most farmers, about 70%, are elderly. And they don’t have the power to maintain their farms, especially if they don’t have enough money […] for their work. That’s how they abandon them,” Asientu explained.

To stop this trend, both Ivory Coast and Ghana took an unusual step in 2019 to improve the living conditions of farmers. They said cocoa buyers would have to pay an additional premium of $400 per metric ton of cocoa beans purchased to compensate for the changing and aging cocoa labor market – the so-called Living Income Differential (LID).

But a new study by the humanitarian organization Oxfam, released at the World Cocoa Conference, shows that this approach has failed, in part because of rising commodity prices. But the policy also collapsed in part because the traders they also pay a premium for cocoa based on negotiation based on qualities such as taste, fat content or grain size – the so-called ‘country difference’.

“At least if [η τιμή στην παγκόσμια αγορά] it came to a certain level where the farmer would always be comfortable enough to produce even and the buyer would also be able to afford [κακάο], we could keep it,” Boafo said. “But in this situation, where the market is not working in the interest of the cocoa farmer, the viability of the industry becomes difficult».

Oxfam’s study reveals that cocoa buyers only narrowed country differences for Ivory Coast and Ghana after those countries introduced the $400 premium to support farmers.

End of chocolate?

Meanwhile, there is already another major cocoa crisis on the horizon in these two top producing countries: production levels have fallen drastically in recent years. In the cropping season between 2021 and 2022, Ghana produced about 750,000 metric tons of cocoa beans. But since then, cocoa production has plummeted. Ghana’s cocoa production for the 2023-2024 season is now expected to decrease by almost 40%.

Meanwhile, COCOBOD spokesperson Fiifi Boafo says this grain shortage has been the trigger for recent prices that have topped $10,000 per tonne on the world market. Asientu explains that in addition to not having fair prices for cocoa beans, the sector also faces serious threats from climate change and other factors.

“Now we have unusual rainfall, unusual sunshine and sometimes we cannot predict them. We also have a lot [άλλα] issues, such as diseases, which farmers would have to control,” he told DW “And sometimes access to chemicals to fight [ασθεινών] it also becomes an issue.”

Boafou adds that to protect the sector and fight global warming, smart farming methods must be adopted. “Climate change is a major concern“, he said. “It is essential to be able to deal with the effects of climate change.”

But whether the issue is climate change, commodity prices, pests, production rates or incentives to continue cocoa trade, it appears that the countries that produce the precious beans do not have much power to influence the price outcome. That power, it seems, rests almost exclusively with chocolate buyers and their middlemen.