Cocoa Prices Rise But Farmers Stay Poor

In response to press reports that 7% of the world’s cocoa market has been bought by an anonymous investor, the Fairtrade Foundation comments that this only underlines the volatility and instability of the world cocoa market. These circumstances seldom benefit the people who actually produce the raw commodity - while speculators play the market in the hope of making a quick fortune, cocoa farmers struggle to barely make a living.

"Cocoa farmers are in a precarious situation when one or two speculators can hold their futures in their hands", says Harriet Lamb, Executive Director of the Fairtrade Foundation. "The wild fluctuations in the cocoa market make life extremely unstable for farmers. It is very difficult for them to build their organisations and plan their lives," say Harriet. "In our experience, whatever the current upturn in prices, little will go back to the farmers who could soon be once again at the mercy of low prices".

The Fairtrade Foundation offers the only independent consumer guarantee that farmers have received a better deal for their produce. The Fairtrade Mark appears on a range of foods including cocoa and chocolate products. "The rising sales of Fairtrade chocolate and cocoa – a 22% increase in 2001 over 2000 - shows that it is possible for cocoa buyers to pay a stable, equitable price to farmers and still succeed commercially", says Harriet (see notes to editor).

Shortage of supply, coupled with depleted stocks held by processors, is responsible for the doubling of cocoa prices over the past 18 months, and apparently the speculator – who has bought about 200,000 tonnes of cocoa futures contracts – is hoping to cash in by driving prices above the current 15-year highs.

Except for the period June 1997 to September 1998, world cocoa prices have been consistently low since 1988. The slump that began in September 1998 saw prices collapse to a 27-year low of $714 per tonne in November 2000. While world cocoa production has been below demand in eight of the past 11 seasons, processors were able to use stocks built up in the years when prices were low.

Although recent prices of around $1730 - $1800 per tonne on the New York futures market are being described as high, they are just about hitting the Fairtrade minimum price of $1750. The Fairtrade Foundation’s minimum price is calculated to cover the costs of sustainable production and to enable farmers’ organisations to invest in improving their standard of living.

• The Fairtrade Mark is the UK’s only independent consumer label that guarantees a better deal for third world producers. The Fairtrade cocoa price is $1600 per tonne plus $150 premium for business or social investment. When the New York futures market price is $1600 or above, the Fairtrade price is New York price plus $150 premium. A graph tracking the international market price and the Fairtrade price of cocoa over the past eight years is available on request.
• The recovery in cocoa prices is a result of falling supply and depleted stocks held by processors. The International Cocoa Organisation (ICCO) is forecasting a production deficit of 130,000 tonnes by end of season in September. Stocks are expected to be down 11.2 per cent on a year ago.
• The main reasons given for the supply shortfall are substantially lower crop forecasts for Africa, particularly in the Côte d’Ivoire and Ghana, and crop neglect due to the low prices received by farmers in recent years.
• Two thirds of cocoa produced worldwide is estimated to be grown by smallholders. West African economies are critically dependent on cocoa. Revenue from cocoa accounts for more than one third of Ghana’s total export earnings and 40% of those of Côte d’Ivoire, the world’s largest cocoa producer.
• In Britain, we eat more confectionery per capita than in any other country, each consuming around 9.5kg of chocolate a year.

Fairtrade Mark chocolate and cocoa products:

• Co-op Own Brand Fair Trade Chocolate
• The Day Chocolate Company Divine, Darkly Divine and Dubble chocolate bars
• Equal Exchange Chocolate Brazil nuts
• Green & Black's Maya Gold chocolate and Cocoa
• Oxfam Organic Cocoa and Fair Trade Chocolate
• Sainsbury’s Own Brand Fairtrade Chocolate and Drinking Chocolate
• Traidcraft Geobars and Organic Chocolate bars.

For more information or to arrange an interview, please contact Eileen Maybin or Abi Murray on 020 7405 5942 or mobile 07770 957451.