Fairtrade confirms minimum price increases paid to cocoa farmers
Ethical organisation Fairtrade International has confirmed that it will raise its minimum prices paid for conventional cocoa from $2,000 to $2,400 per metric tonne at the point of export (FOB), marking a 20% increase.
The group said as regards organic cocoa, its own set prices will be $300 above the market price, or its own minimum payment level, whichever is higher at the time of sale. This is a change from the current minimum fixed price of $2,300 per metric tonne for its certified organic cocoa.
World cocoa prices plunged by more than a third last year, and it is farmers who bear the brunt of price volatility. Prices at the start of 2015 had stood at nearly $3000 a tonne, resulting in a sharp decline in farmer earnings. Fairtrade is the only certification scheme that has a mandatory minimum price, which acts as a safety net for farmers when market prices fall while allowing them to benefit when prices rise.
As the charitable organisation explained, the current cocoa price set by the government of Côte d’Ivoire, the world’s biggest cocoa producer, is $2,124. Fairtrade buyers pay farmer organisations the differential when the Fairtrade Minimum Price is higher. Around two thirds of the global cocoa supplies are presently sourced from Ghana, the Ivory Coast, Nigeria and Cameroon.
Last month, Confectionery Production reported that Ivory Coast is increasing the set level of pay to farmers, from 750 francs ($1.34) per kg, from its previous low of 700, which was welcomed within the industry, but this was still some way short of rates of over 1000 francs being paid before price slumps two years ago.
The additional Fairtrade Premium will be increased from $200 to $240 per metric tonne, the highest fixed premium of any certification scheme. This is an amount on top of the selling price, paid directly to farmer organisations to spend on projects of their choice. The Premium helps to build strong and viable cooperatives that can respond to their members needs and strengthen them as long-term business partners for buyers. In 2017, Fairtrade cocoa farmer cooperatives earned nearly $43 million in Fairtrade Premium to invest in their communities and businesses.
The new price structure, agreed by the Fairtrade Standards Committee, a multi-stakeholder body which includes farmer and trader representatives, will take effect on 1 October 2019. The decision follows a lengthy consultation process across the cocoa supply chain with Fairtrade farmers, traders, manufacturers, and chocolate brands.
The challenges in the West African cocoa sector are huge, with a Fairtrade study in April 2018 showing that 58% of Fairtrade certified cocoa farming households in Côte d’Ivoire had incomes below the extreme poverty line. The new Fairtrade Minimum Price will allow average Fairtrade cocoa growing households to earn above the extreme poverty line. Fairtrade expects to review its cocoa Minimum Price and Premium again in three years.
Confectionery Production sought comment from the sustainable cocoa group, the International Cocoa Organization, based in the Ivory Coast, regarding the recent pay increases to farmers. However, the group said it’s policy was ‘not to comment on individual country’s developments’.