African cocoa giants make new move in spat with chocolate sector

For now, it looks like the cocoa-growing giants will continue to struggle to receive the full combined premiums

Cocoa
Ivory Coast’s regulator sold about 1.4 million tons of cocoa for the upcoming season as of mid-May at discounts of between $158 to $177 a ton
Ekow Dontoh & Samuel Gebre | Bloomberg
3 min read Last Updated : Jun 02 2022 | 10:17 PM IST
The top two cocoa growers are stepping up efforts to pressure the global chocolate industry into paying more to help support poor farmers.

For the past few years, Ivory Coast and Ghana have charged $400-a-ton surcharge for cocoa in a bid to gain greater control of the market and boost livelihoods of their farmers, many of whom live below the poverty line. The so-called Living Income Differential (Lid) came on top of a separate quality premium for beans from the two countries that has long been implemented.
 
The problem is that it hasn’t really worked.
 
The LID came in just as Covid-19 hurt demand in the $100 billion chocolate sector. Buyers responded by negotiating the country premium down — and even to a discount — which rendered the LID surcharge ineffective. But even as the world gets back on track, chocolate companies are still not paying up. That prompted Ivory Coast and Ghana to this week start publishing the country premium on a monthly basis in a bid to encourage greater compliance.

“The country differential is being played to offset the LID,” said Alex Assanvo, executive secretary of the Ivory Coast-Ghana Cocoa Initiative. “Anyone who goes below the published premium can be named and shamed.”

Cocoa discount
 
Ivory Coast’s regulator sold about 1.4 million tons of cocoa for the upcoming season as of mid-May at discounts of between $158 to $177 a ton, according to people familiar with the matter who asked not to be named. The volume is more than half of its expected production. For June, the differential will amount to a discount of 125 pounds ($157) to market prices for Ivorian beans and a discount of 60 pounds for supplies from Ghana. The discount is applied before the LID.
 
Ivory Coast and Ghana have in the past threatened to call out companies that undermine the premiums — such as by paying the LID but not paying the country differential. In 2020, when some buyers were accused of trying to avoid paying up, the producers cancelled sustainability programmes that they were involved in.
 
Nestle SA said it pays a fair price for cocoa and has paid the LID since it began, believes farmers should earn enough to live adequately and has started a direct cash-incentive programme for growers. The company also said it will find a transparent and durable solution for cocoa pricing.
 
Lindt & Spruengli AG said it will continue to buy cocoa with full LID pricing and that it supports farmers through its own programme. Hershey Co said it continues to support and pay the LID, and has programmes to support farmers. Mars Inc last year urged support for the LID.
 
For now, it looks like the cocoa-growing giants will continue to struggle to receive the full combined premiums.

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Topics :Cocoa priceschocolateSouth Africachocolate makers

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