High cocoa prices are unsustainable — especially for the people who produce it

By Mikaila Grace Boyd

Cocoa prices on the Intercontinental Exchange (ICE) market have reached a 50-year high, but this price difference isn’t necessarily reaching farmers. So why the high prices? They come as a result of supply shortages due to unusual and extreme weather in key cocoa-growing regions of West Africa, Latin America, and the Caribbean. The reduced yields mean farmers have less cocoa to sell, which ultimately impacts their incomes. The market prices then increase as part of a normal mechanism to respond to decreased supply — but why aren’t those increases being passed onto farmers??

Let’s start by recognizing that many chocolate manufacturers in North America and Europe are feeling the squeeze of high cocoa prices — it's been reported that retail cocoa prices are up 17% in the past year in the US (Cobank, 2024) and that Hershey’s sales have dropped 6.6% during Q4 2023 (Confectionary News, 2024).

But even with an increase in the ICE cocoa price up 90% from this time last year, cocoa farmers aren’t reaping the benefits. This is because, the cocoa prices in Ghana and Cote d’Ivoire are fixed by the authorities at particular times of the year. In the case of Cote d’Ivoire, the prices are fixed in October for the main season and April for the minor season. At the moment, the price that was fixed this past October is what cocoa farmers are receiving.?Additionally, the fixed prices in West Africa pale in comparison to the current ICE New York market prices of around $5,700 USD/MT. The Ivory Coast farm gate price is currently set at $1,610 USD/MT (Bloomberg, 2023) while the state-guaranteed cocoa price in Ghana is set at $1,837 USD/MT for the 2023-24 season (Meyers, 2023). And while cocoa yet to be produced could potentially see increases to farm gate prices, cocoa farmers need better prices now.

?And while cocoa yet to be produced could potentially see increases to farm gate prices, cocoa farmers need better prices now.

West African cocoa farmers are facing a myriad of challenges, like aging trees, pests, diseases, poor soil quality, and changing weather conditions, making it increasingly difficult to sustain their livelihoods. The realities of climate change put added financial burden on farmers as they try to address these challenges. Many Farmers are also moving deeper into the forest, cutting down trees to free up space for more crops, especially as global demand continues to grow at 2-5% per year. Ghana has one of the highest rates of deforestation in the world and agriculture plays an important part in the issue, with cocoa production being one of the main drivers. But at the root is poverty. Farmers just don’t earn enough to sustain their livelihoods. ?

It is astounding to think that despite the over 90% ICE market price increase and the 17% retail increase, most farmers are still not earning a living income from their cocoa yields.?

A living income is defined as sufficient income to afford a decent standard of living for all household members — including a nutritious diet, clean water, decent housing, education, health care, and other essential needs, plus a little extra for emergencies and savings — once farm costs are covered.?

Living Income Reference Prices (LIRP) indicate the price needed for an average farmer household to make a living income from the sales of their crop. These reference prices are instrumental in raising awareness around the fundamental need for sustainable pricing to enable living incomes. ?

In 2018, Fairtrade established preliminary Living Income Reference Prices for cocoa from C?te d’Ivoire and Ghana, triggered by the urgency to prioritize progress towards living incomes for cocoa farmers in West Africa and tied to the comprehensive Living Income benchmark studies by the Living Income Community of Practice. Fairtrade has been testing this approach with frontrunner companies who committed to voluntarily paying the LIRP to their supply chain partners. ?

The Living Income Learning Project, spearheaded by Tony’s Chocolonely and Ben & Jerry’s is a perfect example of the impacts of living income commitments. In collaboration with the six worldwide cocoa cooperatives, the two companies worked to improve farm profitability through crop diversification and payment of the Living Income Reference Price. The 2023 Fairtrade Living Income Progress Report found that, with an average of 48% of total production volumes sold at the reference price, farmers earned an average of 15% more for their cocoa sold. Moreover, the cooperatives that sold an even larger share of their volumes at the reference price earned up to 47% higher cocoa revenues.???

What projects like this show is that you can operate a profitable business while also contributing to improving the livelihood of cocoa farmers. For too long, companies have benefited from the backbreaking work of cocoa farmers without paying their fair share. In the face of increasing extreme weather events and an unpredictable market, supporting farmers’ livelihoods is more important than ever. Companies must be willing to step up and commit to meaningful and lasting partnerships with cocoa farmers based on fairer trading terms that contribute to the well-being of people and planet.?

Mikaila Boyd leads on all things cocoa at Fairtrade Canada.