The European Commission and European governments must commit to recognising living incomes in forthcoming human rights due diligence regulation for the European cocoa and chocolate sector, Fairtrade has urged.
The call comes amid the announcement of a 25 percent reduction in the farm gate cocoa price set by the Ivorian government for the next six months. For their part, Fairtrade certified cocoa co-operatives will earn the Fairtrade Minimum Price for their Fairtrade sales during this period, since the government-set price has dipped below it.
The drop in price comes after the governments of Côte d’Ivoire and Ghana, which produce two-thirds of the world’s cocoa, implemented a Living Income Differential (LID) of $400 USD per tonne on all cocoa purchased from farmers in the region as of 1 October 2020. The LID is intended as a step toward a living income for cocoa farmers, recognising that low global cocoa prices have historically trapped farmers in poverty.
A backlog of unsold cocoa from the October 2020 to March 2021 period has been attributed to reduced demand due to the COVID-19 pandemic, with some reports that some buyers had reacted to the LID by reducing stocks or seeking out cheaper cocoa from other sources.
Ref: Reuters article, ‘Ivory Coast cocoa exporters curb exposure and inventories amid glut’
According to Fairtrade International, a living income commitment by chocolate-consuming countries would complement the Ivorian government’s efforts to stabilise the price of cocoa for farmers.
‘It’s not clear how much of the decline in price is due to the pandemic, and how much was due to some buyers reportedly seeking to avoid the LID. But what’s clear is that farmers lose out. While some buyers have explicitly supported the LID, it’s not clear if all are. The LID is a powerful intervention by the Ivorian government that seeks to provide stability and improvement to all farmers’ livelihoods, which we have supported from the beginning. There needs to be a level playing field, and the human rights due diligence legislation under discussion in the European Union and member states provides just such an opportunity. If the human right to a living income cannot be recognised, then how will all other human rights of cocoa farming families be met in a sustainable way?’ said Jon Walker, Senior Advisor for Cocoa at Fairtrade International.
The European Commission is holding a series of multi-stakeholder talks on sustainable cocoa to feed into relevant ongoing Commission initiatives, including on due diligence and deforestation. Human Rights Due Diligence proposals are expected from the European Commission in 2021 alongside a proposal that may specifically name cocoa on reducing deforestation.
Find out more about the multi-stakeholder talks on sustainable cocoa
The Fairtrade Minimum Price of $2,400/tonne FOB (freight on board) is now 13 percent more than the government price plus the LID, so producer organisations selling on Fairtrade terms will receive the difference of just over $318 per tonne. They also earn the additional Fairtrade Premium of $240/tonne to invest in their businesses and communities. As with West African cocoa overall, most Fairtrade cocoa sales are made during the main harvest, not the mid-crop period starting in April. Fairtrade has also set voluntary higher living income reference prices for cocoa from Côte d’Ivoire and Ghana, and is working with companies to improve livelihoods and sustainability within their supply chains.
‘The price that cocoa farmers earn is not the only element necessary for their families to reach a living income, but it is an essential one. Whether the European Commission addresses living income by directly recognising price or indirectly through the incorporation of living income in human rights due diligence, the subject must be addressed,’ said Walker.
Editor’s note
- The new farm gate price – what farmers are paid – set by the Ivorian government for the period between 01 April 2021 and 30 Sept 2021 is 750 XOF per kg. The farm gate price during the previous period (01 Oct 2020 through 31 March 2021) was 1000 XOF per kg, hence a 25 percent reduction.
- The new reference price for point of export (or FOB) set by the Ivorian government for deliveries between 01 April 2021 and 30 Sept 2021 (‘valeur FOB garanti’ + Living Income Differential) is 1,164,437 (964,437 + 200,000) XOF per metric tonne, which is equal to $2,081.76 USD per metric tonne (using the exchange rate valid on 31 March 2021, 1 XOF = $0.001787779). The price during the previous period (01 Oct 2020 through 31 March 2021) was 1,457,748 XOF per metric tonne at FOB.
- The Fairtrade Minimum Price is $2,400 per metric tonne at FOB. Therefore for deliveries between 01 April 2021 and 30 September 2021, a Fairtrade price differential of $318.24 per metric tonne is payable to Ivorian cocoa producer organisations for their sales on Fairtrade terms. This differential must be 100% paid through to cocoa farmers by the producer organisations. Read more about the Fairtrade price differential.
- The Fairtrade Premium is an additional $240/tonne.
- The Fairtrade Living Income Reference Prices for Côte d’Ivoire and Ghana are $2,200/tonne and $2,100/tonne at farm gate, respectively.
For further information contact press@fairtrade.net.
About Fairtrade International
Fairtrade changes the way trade works through better prices, decent working conditions and a fairer deal for farmers and workers in developing countries.
Fairtrade International is an independent non-profit organisation representing 1.7 million small-scale farmers and workers worldwide. It owns the FAIRTRADE Mark, a registered trademark of Fairtrade that appears on more than 30,000 products. Beyond certification, Fairtrade International and its member organisations empower producers, partner with businesses, engage consumers and advocate for a fair and sustainable future. Find out more about Fairtrade International.
About Fairtrade Africa
Fairtrade Africa, a member of the wider International Fairtrade movement represents Fairtrade certified producers in Africa and the Middle East. Fairtrade Africa is owned by its members, who are African producer organisations certified against international Fairtrade standards producing traditional export commodities such as coffee, cocoa, tea, cotton, bananas, mango and non-traditional commodities including shea butter and rooibos tea. Currently, the organisation represents over 1,050,000 producers across 33 countries in Africa.
Banner image features Dah Oho, Fairtrade Cocoa Farmer, ECAKOG co-operative, Côte d’Ivoire. Photo by Christoph Köstlin, 2019.