The global price of cocoa is experiencing an unprecedented surge, and this could mark a turning point for cocoa farming and policy in West Africa. With over 80% of the world’s cocoa produced in West Africa, the recent price peak presents a unique opportunity for the region’s cocoa farmers and governments to negotiate better deals and address long-standing challenges in the cocoa production value chain.
The Cocoa Powerhouse of West Africa
West Africa, particularly Ghana and Côte d’Ivoire, plays a pivotal role in global cocoa production. These two countries contribute more than 60% of the world’s cocoa output, with Ghana being the second-largest cocoa producer globally. Cocoa is not only a vital agricultural commodity but also a cornerstone of their economies.
Government Responses to Rising Prices
In response to the surging cocoa prices, West African governments are taking action to support their cocoa farmers. For instance, Ghana has increased the state-guaranteed cocoa price paid to farmers by an impressive two-thirds. This means that Ghana’s cocoa farmers will now receive 20,943 cedis (US$1,837) per tonne for the upcoming 2023-2024 season, a significant increase from the previous 12,800 cedis. Cameroon, the world’s fourth-largest cocoa producer, also raised cocoa prices for its farmers, signaling a 25% jump to 1,500 CFA francs (US$2.50) per kilogram.
The Need for Structural Change
As an economics researcher who has extensively studied cocoa production in West Africa, I argue that the recent cocoa shortages can serve as leverage for cocoa producers to address structural challenges in the industry. Rising production costs have not been adequately reflected in cocoa bean pricing, leading to unsustainable farming practices and inadequate incomes for farmers. To ensure the long-term sustainability of cocoa farming, it’s crucial to address these structural issues.
Short and Long-Term Factors
Reduced cocoa output in West Africa can be attributed to both short-term and long-term factors. While short-term factors like adverse weather conditions and disease outbreaks have been widely discussed, long-term structural issues should not be overshadowed. One significant concern is the declining availability of forest land, which has driven up production costs due to the need for extensive land preparation and increased labor.
Reflecting the True Cost of Cocoa Production
It is imperative that the true cost of sustainably cultivating cocoa in these challenging conditions is reflected in the price paid to farmers. Relying solely on market forces will not achieve this goal. In Ghana, for instance, the official producer price often falls short of covering the costs of sustainable cocoa cultivation. This situation leaves farmers vulnerable to exploitation and perpetuates industry problems.
A Path Forward
What would it take for cocoa farmers to cultivate cocoa sustainably, ensure a living income, and prevent deforestation and child labor? To address this, Ghana and Côte d’Ivoire introduced the “living income differential” a few years ago, aiming to provide a premium on top of the market price. However, the initiative faced challenges and faltered due to unfavorable market conditions.
Now, with the crisis in the sector driving cocoa prices to new heights, Ghana and Côte d’Ivoire, along with neighboring countries like Nigeria and Cameroon, have a unique opportunity to collaborate and negotiate better terms for their cocoa farmers. Possible strategies include supply management, price premiums, and value addition.
The surging cocoa prices present a golden opportunity for West African countries to reshape their cocoa industry. By recognizing the structural challenges and leveraging the current cocoa shortage, these nations can negotiate better deals for their farmers, ensuring sustainable cocoa cultivation and addressing long-standing issues. This moment could mark a turning point towards a brighter future for cocoa farming in West Africa.