The prevalence of child labor in cocoa production points to larger issue in West Africa: farmer poverty.
The effects of colonialism and poor governance plague West Africa to this day, and farmers are acutely affected. Only 9.4 percent of cocoa farmers earn a living income each year. In the Netflix documentary Rotten, one cocoa farmer said that most of the cocoa farmers in his area make about $200 per year– much less than one dollar per day.
In comparison, CEOs of major chocolate companies earn millions of dollars per year.
To earn a living income, many farmers would have to earn more than twice as much as they currently do each year.
One reason for the endemic poverty of smallholding cocoa farmers is the structure of the market. As we learned in week one, several large companies conduct all cocoa processing. This results in an hourglass-shaped market, with millions of farmers on one side, billions of consumers on the other side, and the major chocolate companies and processors in the middle. This powerful position in the market allows several processing companies to effectively control prices– and traps farmers in poverty.
These companies argue that they follow the world market price to stay competitive– while returning millions of dollars to shareholders each year. Without bargaining power, farmers have few options to counter this market concentration and domination.
A common approach to increase farmer income has been to encourage farmers to increase their yields. However, increasing the amount that a farmer grows only serves to increase the supply of cocoa beans on the market, ultimately driving prices further down. Better agricultural practices are important to protect the environment and to enhance farmer livelihood, but aren’t a sustainable approach to increase farmer incomes. It’s similar to telling any other laborer that in order to make more money, they need to work more– they may make more money by working more, but this won’t solve the structural issues causing poverty.
An important part of the living income discussion is farm gate prices– the amount that farmers receive for their beans when they leave the farm. While calculating a fair price is difficult due to a lack of data, the truth is that cocoa prices have decreased over time, hurting farmers.
Some progress has been made towards paying farmers a living income. Fairtrade certified farmers are supposed to receive at least a set amount for their cocoa– effectively a price floor– that only increases when the world market price for cocoa is above the set amount. In 2020, the governments of Ivory Coast and Ghana began paying cocoa farmers a ‘Living Income Differential’– a premium of $400 per ton for their cocoa above the world market price.
In the long term, farmer poverty will only be eradicated when farmers are paid more for their beans. To get to that point will require market and policy changes.
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