November 30, 2020

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Mondelēz report highlights $10 billion annual income gap for Ghana and Ivory Coast farmers

4 min read

Mondelēz International has released a major report with Wageningen University & Research into reducing the $10 billion annual income gap for cocoa farmers in Ghana and Ivory Coast, believing cross sector action is required, reports Neill Barston

Confectionery Production has had sight of an executive summary of the paper, titled, No Silver Bullet, which offers insight into the true scale facing the industry, civil organisations and the confectionery sector in bridging the financial shortfall to enable the sector’s future sustainability.

Cathy Pieters, director of the company’s Cocoa Life sustainability programme, spoke at this week’s online World Cocoa Foundation partnership meeting, revealing for the first time the financial gulf that exists in achieving the industry’s goals.

As noted in the new report, she explained that in order to deliver 75% of cocoa farmers into a living wage existence in Ghana and Ivory Coast, then an annual figure of $10 billion would be required across Ghana and Ivory Coast. That would amount to almost double the total 2018 cocoa export figure for Ghana and Côte d’Ivoire ($5.31 billion US).

Despite the scale of the task, Pieters (pictured below at the WCF meeting), said that she was optimistic that headway could be made in the challenge, but noted that it could not be achieved without engaging with overall government plans to ‘create a road-map to stimulate rural economies.’

“While the paper to shows the potential to advance cocoa farmers in West Africa towards a living income through a number of income enhancing interventions, it also uncovers the reality of the size of the income gap, and the limited number of households that realistically attain the critical conditions to reach a living income with cocoa-centric tools alone.

“Our data shows that only about 30% of cocoa farmers in Ghana and Ivory Coast reach those critical conditions, such as land access, size of land and productivity. The paper estimates the annual income gap at $10 billion, allowing for a clear majority of households in both countries to reach that living income, and thirdly, if we all want to be closing that gap, then that would definitely require strong, thriving and diversified rural households that can see clear pathways towards reaching that living income.

“So we are excited by these insights, and we believe that more than ever, it’s important than ever that we share them, as it will help us understand and embrace the size of the challenge. Also, in doing so, as a sector we can evolve from sometimes finger pointing, to genuine sector-wide collaboration where the role of all actors contributing and benefitting from strong rural economies are well identified that their strengths can best be leveraged,” added Pieters who said that it was her hope the study would have a positive impact.

In her view creating round-table events across Ghana and Ivory Coast to develop policy further may be a potential route forward, as well as data-driven systems that offered collaboration opportunities within the farming sector. In her view, a multi-stakeholder approach to tackling what remains a major problem was the best way forward.

Inequality highlighted

However, the No Silver Bullet paper reinforced the scale of the issue, which it said had been compounded by marked inequality among rural households in access to the resources needed to grow cocoa, notably land and assets, which impacts cocoa production volumes because farmers do not have sufficient land to produce large volumes, which in turn means they cannot invest enough to achieve good yields.

While the study noted that the introduction of the Living Income Differential payment (of $400 a tonne of cocoa introduced this year) was welcome, it stated  that paying all farmers the same specific price per kilogram, would not enable the majority of them to achieve living income standards. This is because they do not have sufficient land resources for the higher price of cocoa to notably increase their income.

According to its findings, even a doubling of market prices would only lift an estimated 17% of additional farmers to a Living Income despite the average income exceeding the Living Income Benchmark established for the Living Income Community of Practice.

As there are a lot of producers who produce very little, even if cocoa prices were higher, they wouldn’t make much more money as they don’t have much to sell to begin with. Of the total 41% of farmers who would earn a Living Income if prices were doubled, most did so already, before the doubling of the price (currently 24% of farmers reach a Living Income in the Ghana dataset). Two-thirds of the households with the lowest incomes benefit the least out of these measures. The report noted that limited access to alternative crops other than cocoa had also had a notable impact, with farmers becoming over reliant upon the crop, which remains a key area of focus.

Some hope is on the horizon, as independently of Cocoa Life, as part of the Mondelēz International research project ‘Targeted Good Agricultural Practices’, it is estimated by the company that about a third of farmers in Ghana and Côte d’Ivoire are in a good position to significantly benefit from farming improvements in the mid-term.

During a project pilot in Côte d’Ivoire, applying very concentrated and coordinated measures on a carefully selected group of farms to increase cocoa output over three years, production on a sample of those farms increased on average by 190%, and net income from cocoa by over 125%. So, for some specific groups of farmers, carefully tailored approaches can make big improvements to cocoa farm efficiency, directly addressing one of the underlying issues behind low income.

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