Effective by the end of this month, May 2022, Cote d’Ivoire – Ghana Cocoa Initiative will begin a monthly publication of origin differential premium paid by multinational buyers for cocoa beans from Ghana and Cote d’Ivoire.
A joint statement issued in Abidjan by the heads of Ghana Cocoa Board, Conseil Café Cacao and the CIGHCI noted that the measure is “an effort to be more transparent.”
The origin or country differential is “a distinct premium that the exporters pay for the quality of cocoa beans,” according to the Cote d’Ivoire – Ghana Cocoa Initiative (CIGHCI).
Ghana and Cote d’Ivoire, the two leading global producers of cocoa, in 2019 introduced the Living Income Differential (LID), a $400 per tonne premium, as part of a new pricing mechanism primarily aimed at improving the incomes of their cocoa farmers.
“The underlying objective was to achieve a target floor price of at least $2,600 per tonne, enabling farmers to earn a minimum of 70% of this amount. This measure was publicly welcomed by all stakeholders in the cocoa sector,” the statement said.
Despite the noble intention, Ghana and Cote d’Ivoire failed to achieve the floor price they sought to establish for the benefit of their poverty-stricken farmers.
“Market prices fell significantly, while the original differentials were negotiated downwards by the export multinationals, which impacted and weakened the gains of the LID and its expected benefits to the farmers,” the statement disclosed.
Reuters has reported that according to some industry sources, the origin differential has fallen to around negative $155 per tonne in Ivory Coast and negative $125 in Ghana from around $300 and $200 respectively.
Emerging industry rhetoric in support of a decent living income for cocoa farmers borne out of better cocoa prices has hardly translated into action as hopes for enhanced conditions for farmers wane.
Falling farmgate price
The West African cocoa organisation further observed in the statement that global support from chocolate manufacturers and cocoa traders for the measure has not fully realized the ambition of securing higher producer prices for cocoa.
In Ghana, contrary to farmers’ expectations Cocobod could not deliver an increase in farmgate price from the GHC660 per bag announced two years ago.
Cote d’Ivoire on the other hand has been forced to recently lower the producer price in spite of the introduction of the LID.
West Africa’s cocoa farmers earn less than $1 a day but are under increasing pressure to invest more into labour costs and climate interventions to deliver sustainable cocoa to the markets.
It was the hope of leaders in Ghana and Cote d’Ivoire that a combination of the Living Income Differential (LID), the London Stock Exchange price and the origin differential would guarantee a decent income for farmers.
But they regret, however, that the complete erosion of origin differentials has dashed that hope.
‘’The origin differential is a key factor in determining cocoa prices. Today, the differentials being negative, the impact of the LID on the price guaranteed to producers has almost no effect on the income of growers who should have experienced a significant increase,’’ the statement said.
In what seems to be a remedial action, the duo are resorting to full transparency on the payment of the origin differential cocoa premium by buyers.
“The two countries will publish this amount, at the end of every month, starting in May 2022…in an effort to be more transparent,” the statement concluded.
Meanwhile, the Economic and Marketing Committee of the Côte d’Ivoire – Ghana Cocoa Initiative (CIGHCI) has at the close of its 3-day meeting in Abidjan, Côte d’Ivoire, pledged a renewed commitment to the fight for a sustainable price for cocoa and a decent income for cocoa farmers in the two cocoa countries.
Committee members later paid a courtesy call on the Ivorian Prime Minister, Patrick Achi.