Ghana and Cote d’Ivoire have announced a new cocoa trading pricing mechanism offering a $400 per tonne living income differential (LID) to the farmer.
The Living Income Differential is introduced as a “guarantee” to the $2,600 per tonne floor price by the two top producers of cocoa, agreed on June 12 in Accra.
Decent Income for Farmers
The pricing mechanism, according to the Ghana Cocoa Board, “would help provide a remunerative price for the farmer.”
Ghana and Cote d’Ivoire introduced the LID July 3, 2019, in the Ivorian capital, Abidjan, in consultation with stakeholders as part of the follow-up meeting up to the historic Accra cocoa floor price deal.
A statement issued by COCOBOD after the Wednesday meeting said, “the Mechanism which was introduced to industry players was understood”.
It explained, “this system takes into consideration a fixed living income differential which would provide farmers a decent income”.
The two biggest producers of cocoa in the world would, however, continue to “engage industry on issues of sustainability”, the statement ended.
Ghana and Cote d’Ivoire secured a favourable floor price deal for their cocoa beans, after a historic stakeholder meeting in Accra agreed to a proposed US$2,600.
Per the agreement stakeholders comprising buyers, traders, processors, and manufacturers, say they will not be buying the commodity below US$2600 per tonne.
It is the first time that cocoa producers would have a significant say in the determination of price for the commodity, major raw material for the global US$100-billion chocolate and cocoa confectionery industry.
Ghana and Cote d’Ivoire are the world’s top two producers of cocoa beans, with the duo producing 65 percent of annual global supply.
However, the two together earn about US$6 billion for their produce.
The demand by the duo came on the back of falling prices of cocoa on the international market, hitting US$2436.08 per tonne on June 10, 2019.
The situation had meant farmers earned less for their work, sometimes unable to recover operational costs.
Evidence by the Ghana Ministry of Agriculture indicated some cocoa farmers had begun cutting down trees for rubber cultivation, cashew, among better alternatives.