An industry study has placed a spotlight on required living income levels and operating challenges for cocoa farmers working in Peru, has highlighted the income gap between broader industry standards and poverty line earning as defined by the nation’s government, reports Neill Barston.

The research, co-financed by Switzerland’s State Secretariat for Economic Affairs (SECO) and backed by the Swiss Platform for sustainable cocoa (SWISSCO), noted the South American country is the 8th largest player in the industry, as well as being the 7th largest coffee producer, underlining the importance of the two crops to its agricultural sector.

As the organisation revealed, growing interest in developing a living income benchmark in Peru led to the Anker Research Network being commissioned to conduct a study to estimate the living income for a typical family of four.

This comprehensive analysis estimated the income required for a household to afford a decent standard of living. It aims to determine the amount of money necessary for individuals and families to meet their essential needs, such as nutrition, housing, healthcare, education, clothing, transportation, communication, household essentials, recreation, and emergency funds.

A Living Income Benchmark is an important instrument in international cooperation. So far, no such benchmark has been measured for cocoa growers, and its authors believe this could form an important element of public policy, with the four regions studied – San Martín, Cajamarca, Junín and Cusco – having a total of around 492 000 coffee and cocoa farmers.

The estimated family living expenses (that is living income) for the four cocoa- and coffee-growing regions of Peru in May/June of 2022 were estimated at Peruvian sol (PEN) 2,371 per month in San Martín. This corresponds to 638 US dollars (USD). In the other regions studied, the living income is as high: Cajamarca PEN 2,146 (USD 576). Junín PEN 2,101 (USD 2,101). Cusco PEN 2,359 (USD 665). The average living income for the four regions is PEN 2,244 (USD 604) (see Figure 2 below). This is the monthly net income necessary for a typical family of four (two adults and two children) to pay for a low-cost nutritious diet, decent healthy housing, adequate healthcare, education of children through secondary school, clothing, and all other essential expenses.

As Swissco noted, the findings of the living income benchmark address a research gap and provide valuable information on the costs of a decent standard of living for families in cocoa growing regions, though it conceded further evaluation was now required.

The cocoa and coffee sectors of Peru, led by work of the government’s national action plans, are seeking to compile existing data to calculate the income gap. The Ministry of Agriculture, UNDP Peru, Sustainable Food Lab, Solidaridad and Rikolto for instance, are developing an approach in the regions of Cajamarca and San Martin to assess the income gap, aiming to align the metric of living prosperous income with Peru’s National Plan of Action.

Furthermore, The NGO Fairtrade Max Havelaar plans to use the study results to calculate a living income reference Price for coffee from Peru (expected to be published in in the fourth quarter 2023) as part of their holistic living income strategy.

Deforestation event
In another key development for Swissco, the organisation recently hosted a key event in Bern, Switzerland, with the Soy and Palm Oil Network and the Coffee Interest Group decided at the Gurten in Bern on 28 June 2023 to tackle the challenge of deforestation together in the future.

As the sustainability group noted, the Minister of Water and Forests of the Ivory Coast, Laurent Tchagba expressed his conviction that the causes of forest loss are best tackled by working together as far as possible with all stakeholders concerned on the ground.

Notably, as Swissco stated, between 2010 and 2020, an average of 4.7 million hectares of forest were destroyed worldwide per year. One of the main reasons for deforestation is the expansion of agricultural land. Plantations of coffee, cocoa, palm oil or soy drive deforestation.

Critically, new EU law in the form of the Deforestation-Free Products Regulation (EUDR) came into force. New framework conditions will apply to the import of coffee, cocoa, palm oil and soy into the EU from 2025. The regulation requires companies to prove that their supply chains do not contribute to the destruction or degradation of forests.

To do this, they must identify the exact geographical coordinates of where the agricultural commodity is produced as part of their due diligence to ensure that their products do not contribute to deforestation or forest degradation.

The four sector initiatives discussed with representatives from politics, business, and civil society what the new EU regulation will mean for Switzerland and the commodity sectors concerned, what is already being done and what solutions are needed to ensure transparency and sustainability in the supply chains of these agricultural commodities.

Furthermore, the Ivory Coast’s Minister of Water and Forests, Mr Laurent Tchagba, emphasised the importance of preserving the forest in his country, Ivory Coast, which has been severely impacted over the past six decades, with the country reportedly losing around 80 per cent of its forested areas.

He said: “We must tackle the source of deforestation and collaborate in depth with all the players concerned”, says Laurent Tchagba. This is already evident in his country, where initiatives have been taken to conserve forests and regenerate forest cover.

The participants identified three areas for action The participants agreed that Switzerland has already done a great deal in the four commodity sectors and that its commitment will continue regardless of the EU regulation. Even though the affectedness and preconditions in the four raw material sectors are different, the sector initiatives want to use the potential of joint measures to ensure sustainable supply chains.

In relation to this, last month, the assembled bodies defined three areas of action in which they want to cooperate in the future: 1) Traceability: The joint further development and alignment of standards and the use of synergies in data management and data tools are essential for improved transparency, traceability and ultimately also sustainability impact. Orientation towards globally recognised sustainability standards strengthens the harmonisation process. In this context, new digital technologies are becoming increasingly important. “Sustainability standards like FairTrade, the Roundtable on Sustainable Palm Oil and Rainforest Alliance support value chain actors to avoid deforestation by offering relevant and verified traceability data that preserves the identity of certified products along the supply chain.

This data can help companies conduct deforestation due diligence risk assessments,” says Joshua Wickerham, speaker at the conference from the International Social and Environmental Accreditation and Labelling Alliance (ISEAL). 2) Landscape approaches: the four sector initiatives are engaged in the development and implementation of landscape approaches to forest protection and restoration. Members of the initiatives strive to enable farmers to effectively adopt practices of climate-smart agriculture to enhance biodiversity and resilience to climate change in sourcing regions. 3) Investments: The transition to good, climate-friendly farming practices requires high investments in training, advisory services, plant material and financial compensation for small-scale producers, especially in the beginning. Therefore, the potential of public-private partnerships, climate funds and local financial resources should be better utilised and optimally coordinated.