Cocoa prices soar, but African farmers don’t benefit

Chocoa is the world’s largest cocoa and chocolate trade fair, attracting major players to showcase new products. ‘Amsterdam’s status as the world’s largest cocoa port makes it a fitting location for the event’, says Bas Evers, Program Manager for Africa at Rabo Foundation. ‘This year’s event uniquely coincided with the annual World Cocoa Foundation (WCF) meeting. Here, the industry discusses trends and challenges.’

Cocoa prices have skyrocketed 70% in the past year, driven by three factors, according to Bas. ‘First, a poor harvest in West Africa, responsible for 60% of the world’s cocoa production. Due to extreme rainfall and flooding in Côte d’Ivoire and Ghana led to crop failures and lower yields. Secondly, West Africa grapples with cross-border smuggling issues. For instance, cocoa from Ghana is taken to neighboring Togo for higher or unregulated selling prices.’

The third reason is increased demand. ‘The global middle class is growing. People have more disposable income and therefore spend more on chocolate.’ Moreover, the price is unlikely to drop soon due to new European legislation (EUDR) against deforestation and forest degradation. Bas: ‘Products must be fully traceable and cannot be grown on deforested land. Farmers must prove compliance to continue supplying Europe, the largest export market.’

Michaël de Groot, Rabo Rural Fund’s investment manager for Latin America, cites another reason for the poor harvest. 'The cocoa trees in Côte d’Ivoire are generally old. As a result, the trees produce fewer beans and are more susceptible to disease. Additionally, many farmers are eldery and often lack successors, as their children move to cities. A year of unfavorable weather becomes a major problem. While traders are aware of these issues, they have take little action. It shouldn’t come as a surprise for them.’

Latin American farmers are benefiting from the high cocoa price, according to Michaël. ‘They operate in a more commercial market and can demand higher prices for their cocoa beans.’ However, the situation is different in Côte d’Ivoire, where the government sets the cocoa price. Unfortunately, that price is too low for farmers to make a living. Bas explains, ‘Farmers hardly see any benefit from the price increase. This could change if they add value to the beans themselves - processing them into semi-finished or finished products. Currently, this happens in Europe. African farmers lack the resources and knowledge. Enabling them to add value would be fairer and more efficient, leading to shorter and more transparent supply chains.’

He therefore believes initiatives such as the Camaye cooperative in Côte d’Ivoire present a hopeful outlook. ‘Camaye has set up a small chocolate factory. By producing the end product themselves, the retain the added value.’ Rabo Foundation also supports the rejuvenation of cocoa trees and assists farmers in developing new income models. ‘For example, intercropping cocoa trees with bananas and yams. These provide additional income. Moreover, it benefits the growth of cocoa trees and enhances biodiversity, which is crucial for mitigating climate change.’

In this context, Michaël welcomes the EU’s new regulation against deforestation - not only for cocoa but also for coffee, soy, rubber, and timber. ‘For years, deforestation has been a topic for discussion. It’s good that the EU is now taking a firm stance. However, in the short term, it may unintentionally affect smallholder farmers who are not well-organized. Many farmers lack the resources to provide the necessary data for tracing the cocoa’s origin.’

Rabo Foundation supports farmers and cooperatives in data management. Bas explains, ‘We have developed a toolkit in collaboration with Meridia that helps collect and manage the right data. Additionally, we explore financing solutions that align with climate change, such as considering longer droughts and shorter, more intense rainy seasons.’