Will we pay the price it takes to achieve sustainable cocoa livelihoods?

“Don’t worry, farmers aren’t abandoning cocoa”, read the headline of a recent article forecasting the future of the crop, and many a chocolate lover sighed in relief. Reading further, though, it appeared the situation for small-scale cocoa growers in West Africa wasn’t all that rosy. Yet cocoa continues to be the best option for many small farmers. In Côte d’Ivoire, the world’s largest cocoa origin, there simply aren’t any alternatives that provide farmers with comparatively stable incomes and a certain level of land security. But that doesn’t make it good business…

© Kate Fishpool/Fairtrade Foundation

Despite the numerous efforts of the industry and other actors to make cocoa more sustainable, gains in productivity have been offset by lower farmgate prices, minimizing the net benefits for producers. And so it happens that the majority of cocoa farmers continue to live in extreme poverty, which is the root cause of many other endemic problems we know too well, from child labour to massive deforestation.

Even Fairtrade cocoa farmers do not escape this reality. Our new household income study among cocoa farmers in Côte d’Ivoire flags a tough reality that demands further action.

Imagine a typical farmer household in Côte d’Ivoire: a couple in their early fifties with six children at home, one being of working age and helping out on the farm. They own some 6 hectares of land on which they grow mainly cocoa, but also some plantain, cassava and vegetables for their own consumption. Whatever is left over is sold on the local market. The cost of a decent standard of living (or a ’living income‘) for this household is estimated at 6133 US dollars per year. This covers a basic, nutritious diet, decent housing with proper sanitation, school fees for the children, healthcare and some other essential needs, as well as a small provision for unexpected events. But the average household earns only 2700 US dollars — below the World Bank’s extreme poverty line. Only 12 percent of the cocoa households in the study currently earn or exceed a living income.

Fairtrade’s mission is to empower small-scale producers through trade so they can achieve sustainable livelihoods — and in many places, our model works. But this research underlines that in Côte d’Ivoire, entrenched challenges continue to prevent most cocoa farmers from earning a decent income, and much more action is needed to invert this poverty trap.

Let’s look at our typical household again. They currently produce little more than 400 kilogrammes of cocoa per hectare, which is only half (or even a quarter, depending on who you ask) of what is considered to be a feasible yield if you implement good agricultural practices. But in order to increase their yields, they will have to plant new trees, buy fertilizer and hire additional labour, while their farm revenues are only just about sufficient to feed the family. Without any savings to reinvest in the farm, the yields remain low.

© Marco Garofalo/Fairtrade Italia

The Fairtrade Minimum Price has so far been set based on the principle of covering farmers’ average costs of sustainable production, but it doesn’t take into account what is needed to increase productivity in order to achieve higher revenues. As we are reviewing our price model, we will start taking these aspects into account, including what is needed to achieve sustainable yields. A truly sustainable price should enable a smallholder farmer to cover these costs and allow a margin to support a living income.

Although data analysis is still ongoing to establish a ‘living income reference price’ — or the price necessary to support a living income, given certain parameters of adequate productivity and viable farm size — we can safely predict that this will be significantly higher than the current market price. As we consult with producers and traders on how to implement a sustainable price — conscious of the fact that farmers need to sell their beans and that Fairtrade is already the certification scheme with the highest premium requirement — it becomes clear that bridging the gap is not a straightforward matter.

The head of our typical household is a member of a Fairtrade certified cooperative, together with some 500 other farmer members. Let’s assume that the cooperative members jointly produce 2000 tonnes of cocoa beans, but only manage to sell a quarter of it on Fairtrade terms, while the rest is sold on the conventional market. As a result, the benefits of a sustainable price get diluted as these are distributed across all member farmers.

So Fairtrade’s Living Income Strategy is a balancing act. Price plays a critical part within a holistic approach towards living incomes, but we cannot set the price at a level that results in lower sales. While improving productivity, we also need to take measures to avoid oversupply. And we need to strengthen smallholder cooperatives, so they can run their businesses efficiently and transparently, creating the highest possible value for their members. We will put this holistic model into practice with committed, forward-looking partners, in equitable partnerships with cooperatives, to provide the evidence that living income is achievable.

By sharing the findings of this household study we are aiming to raise more awareness of the challenges that exist in global trade. We hope it will contribute to the efforts of everyone who is committed to achieving the UN’s Sustainable Development Goal number one, to eradicate poverty, and of everyone who upholds the Universal Declaration of Human Rights, which states that “everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity”. Smallholders who work their own land have the right to a living income. Governments, traders, chocolate makers, retailers, consumers and the farmers themselves all share the responsibility to make the necessary change happen.

Chocolate won’t disappear. But will we continue to allow cocoa farmers to live in deep poverty, or are we going to pay the price it takes to achieve sustainable livelihoods?

By Carla Veldhuyzen van Zanten
Senior Advisor Sustainable Livelihoods
Fairtrade International