As of this month, Ghana and Ivory Coast (Cote d’Ivoire), the world’s biggest cocoa producers have announced that they will no longer be selling cocoa at a negative origin differential – a market premium earned for the produce quality – so as to protect farmer income.
This announcement by Cote d’Ivoire-Ghana Cocoa Initiative (CIGCI) came after cocoa farmers in the two countries were persistently ripped off due to heavy discounting by multinational cocoa buyers and chocolate companies.
In May, the two countries decided to jointly publish their origin differentials monthly via CIGCI.
“Today, origin differentials in Cote d’Ivoire and Ghana have fallen sharply compared to the differentials in other cocoa producing countries; the differentials for the two countries have fallen by over 150% in the last two years,” said CIGCI.
Cote d’Ivoire’s Coffee and Cocoa Council has raised its premium to £0 per tonne, up from £ -125 per tonne in July.
Likewise, Ghana’s regulator Cocobod has raised its origin differential from £-50 per tonne to £20 per tonne.
Ghana’s premium is higher because of the generally better quality of its beans.
Just last month, Cocobod reported that it was accumulating $400 million debt in a year to maintain farmgate prices at acceptable rates.
“Our ambition is to no longer sell cocoa with a negative premium. It is to ensure that our producers receive a decent and remunerative income for their cocoa and to achieve this, the origin differential must once again be positive and the LID also applied,” Alex Assanvo, executive secretary of the CIGCI, told Reuters.
“We will therefore no longer accept cocoa sold below this level as we move into positive territory,” he added.
The negative premiums have effectively nullified the intended positive effect of the $400 per tonne Living Income Differential (LID) that was agreed upon with chocolate companies, and introduced in 2019 to address the issue of farmer poverty.
Ghana plans to sell the rest of its cocoa export contracts for the 2022/2023 season with the aforementioned positive differential, while Ivory Coast plans to apply the positive differential for the subsequent 2022/2023 mid-crop and 2023/2024 season as it has already sold all its contracts for the 2022/2023 main crop.
‘We have decided with Cocobod in Ghana to set a positive differential for August and for the months to come. The origin differential rewards the good quality of the cocoa we produce, so it is a legitimate request,” a source at CCC told Reuters.
Ghana and Nigeria, neighbouring West African countries, account for over 60% of the world’s cocoa. This should amount to reasonable wealth for Ghanaian and Ivorian cocoa farmers as the global chocolate industry generates about $130 billion in revenue yearly.
However, only about 6% of this revenue goes to these farmers, who often make less than $1 a day.