Living income gains visibility and scale in the cocoa sector

Pricing is a hot topic in the cocoa sector, dominating discussions among stakeholders in the past years. The debate is enhanced by historically low cocoa prices that fail to safeguard a decent income to farmers involved in cocoa production. The vision of providing cocoa farmers with a ‘living income’ has moved from a niche discussion to a sector-wide necessity.

While the establishment of minimum farm gate and export prices has been used as a mechanism to address the price imbalance, sector stakeholders are coming to realise that cocoa farmers and their families living in much more complex circumstances. This is where living income comes in. This refers to the net income a household would need to earn which would enable all members of the household to afford a decent standard of living. It considers key variables such as productivity, decreased cost of inputs, farm size and crop diversification.

Governments join discussion living income

The urgency of cocoa farmers needing to earn a living income has led governments to join the discussion. The governments of Ghana and Ivory Coast, for instance, have raised the minimum export prices for cocoa (at USD 2,600 per tonne), with the addition of a fixed ‘living income differential’ on all their cocoa sales (at USD 400 per tonne), applicable from the 2020/2021 crop.

European governments and organisations have also joined the discussion and the push towards higher incomes. The German and Dutch governments are funding several activities intended to develop a methodology for living wage and living income benchmarks. Both actively promote partnerships to achieve the use of living wages in supply chains.

Launche “Living Income Reference Price”

Fairtrade International is an active member of the living wage coalition. The organisation has typically addressed market price imbalances by establishing minimum prices and premiums paid to farmers. In October of this year, Fairtrade raised its minimum prices, but also launched its Living Income Reference Price. Jos Harmsen, supply and development manager at Fairtrade the Netherlands, stresses that the organisation calls upon the cocoa industry to use this new norm and pay this Living Income Reference Price. Several chocolate companies have already committed to pay this price, among them Dutch chocolate brand Tony’s Chocolonely and the Belgian brand Belvas.

During the Living Income conference in the Netherlands in November 2019, several other commitments were made by companies to work towards paying a living income price. The governments of the Netherlands and Germany stated they will continue to support efforts to achieve a living income, and may try to integrate this into their policies on sustainable trade and development.

To read more about current developments and efforts in other different European cocoa markets, access our cocoa market intelligence page to learn more.

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This news article was written for CBI by Profound – Advisers in Development.

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