A proposed price floor for cocoa grown in two West African countries could disrupt the economics of poverty and exploitation.
Co-written with Martha Mensah, a program officer for Oxfam in Ghana.
In recent weeks two seemingly unrelated news items have caught our attention from a sector that Oxfam cares a lot about: cocoa. Many poor farmers harvest cocoa beans that find their way into consumer products sold in supermarkets across the globe.
- A Washington Post report exposed the continuing problem of children working on cocoa farms in West Africa that supply some of the world’s biggest chocolate companies like Mars, Hershey, and Nestle.
- Ghana and the Ivory Coast—two main cocoa-producing countries—announced their intention to stop forward sales of cocoa beans for the 2020/21 season to discuss a minimum price proposal with their buyers.
While these may seem like separate issues, they point to the same basic problem: the unsustainable production of cocoa worldwide. And they both shine a light on the complexity of a sector that is struggling to find the right answers to the problem.
The human cost of low cocoa prices
It’s no secret that poverty is one of the root causes of child labor. In West Africa, poverty pushes children onto cocoa farms to help secure their families’ survival.
The declining economic viability of cocoa farming is only making matters worse. Volatile and declining cocoa prices make it harder for cocoa farmers to make a living and escape poverty (the average earnings of cocoa farmer households are 37 percent of a livable income in the Ivory Coast). As young adults abandon rural areas to move to urban centers, the supply of rural workers declines. These forces make those remaining farmers more reliant on child labor, exacerbating rural poverty in the long-run by preventing children from gaining an education.
In an era of low cocoa prices, efforts to raise farmer incomes often rely on enhancing farm productivity–a strategy that can be counter-productive if implemented in isolation as it can increase the demand for labor, including children or women without pay. At the same time, higher prices can help raise incomes and reduce the incentive for farmers to exploit children (a recent study estimates a 11.8 percent price premium on cocoa could eliminate child labor in Ghana). This is why the minimum price proposal can also be seen as a contribution to the fight against child labor.
The critical role of buyers
Global food companies have long been the focus of attention regarding their role and responsibility to help make the cocoa sector more sustainable. Although cocoa supply chains are fragmented by design (i.e. most large food companies don’t source most of their cocoa directly from farmers but work through intermediaries), buyers still exert significant influence over farmers and the sector overall through their purchasing power, market share and global sourcing systems.
While food companies have been increasingly proactive in addressing sustainability concerns in their supply chains (often pushed by NGO campaigns), the sector has also been increasingly forthcoming about its failure to deliver despite millions of dollars in investment. Certification systems, one popular sustainability tool, have proven insufficient to effectively tackle the many underlying variables that create barriers to raise cocoa farmers’ incomes (e.g. lack of access to infrastructure, markets, inputs) and thus facilitate the existence of child labor.
This realization has led some buyers to be more open to more directly addressing the underlying economic conditions of the global cocoa sector. These include the issue of low cocoa prices and farmer incomes as one of the root causes for other sustainability issues, including child labor (echoed by Harkin-Engel Protocol Framework of Action that several US companies signed up to). Mars’ Farmer Income Lab, which Oxfam is an advisor to, is one such example.
Where are the women?
The role of women in combatting child labor has been another key area of omission. Since Oxfam launched the Behind the Brands campaign in 2013, we have advocated for greater attention to women’s rights in the cocoa sector. Even though women cocoa farmers have less access to inputs, revenue, and decision making in the value chain, they do a significant share of the labor on farms.
In a 2016 report we highlighted the correlation between investing in women’s empowerment and the reduction of child labor. Recognizing women’s value in the long-term sustainability of the cocoa sector has positive impacts on children, the family, and community. And when women have more control and decision-making over household income, research shows that most of that income goes towards children’s education.
Despite these links between child labor, farmer income and women’s rights, the three areas have often remained separate areas of debate leading to separate strategies in the sustainability portfolios of many buyers. We need more holistic and integrated approaches to solve the challenges of the cocoa sector. And as a landscape review on effective approaches to raise farmer incomes highlighted last year, the most successful approaches are often multidimensional in nature.
A litmus test for cocoa buyers and governments
So are buyers willing to pay higher prices for their cocoa? As of now, they appear to have agreed to the governments’ offer. Other stakeholder groups, like Fairtrade, have also expressed their support.
This is a promising first step. But the future will tell how meaningful it is for cocoa farmers. How much of the price increase will arrive at the farm gate? And how transparent will the two governments be about what happens with their extra revenue?
Global cocoa buyers will continue to have an important role to play as the details of the minimum price agreement are hammered out. It is an opportunity for them (and others) to advocate for greater transparency and a higher share of cocoa revenues going to farmers.
We will be watching.