Industry doubts remain over Ivory Coast, Ghana cocoa floor price

ABIDJAN/JOHANNESBURG (Reuters) - Ivory Coast and Ghana - the world’s leading cocoa producers - failed on Wednesday to come to an agreement with the chocolate industry over how to introduce a new floor price for their exports.

FILE PHOTO: Men work with cocoa beans in Enchi, Ghana, June 17, 2014. REUTERS/Thierry Gouegnon/File Photo

The West African neighbors said last month they would fix a minimum price of $2,600 per tonne (free-on-board) that chocolate companies must pay from the 2020/21 season if they want to access their more than 60% share of global supply.

Cocoa regulators from the two countries met with industry representatives in Ivory Coast’s commercial capital Abidjan to discuss the details of the plan.

Companies represented included Hershey, Mars Inc., Blommer Chocolate, Cemoi, SucDen, Mondelez International , Touton, Barry Callebaut, Cargill [CARGIL.UL], Olam International and Ecom Trading.

The floor price is meant to ease pervasive farmer poverty that has become a blight on chocolate’s image and a threat to the sector’s future in West Africa, as young people walk away from a life of backbreaking labor with little reward.

U.S. food maker Mars Inc. said earlier on Wednesday that it backed the initiative.

“We support moves by governments to intervene to achieve a higher price that leads to a sustainable increase paid to the farmer,” John Ament, Global Vice President of Cocoa for Mars, told Reuters.

In a statement on Wednesday, Ivory Coast and Ghana said they would institute a $400 per tonne so-called Living Income Differential written into export contracts that would kick in if market prices fall below $2,600.

Following the meeting, company officials said they were not in full agreement on the details of the scheme, which they said placed all the risk on them in the case of a major drop in prices.

“The mechanism that Ghana and Ivory Coast proposed to us still lacks clarity and precision for its adequate application, so there will need to be more meetings,” said one company official who asked not to be named.

A second executive confirmed that view.

“They aren’t obliged to accept, because it’s a free market,” Joseph Boahen Aidoo, CEO of Ghana’s cocoa regulator Cocobod, said at a news conference. “If they don’t want to pay the price that we are proposing, they can go elsewhere.”

The floor price is not the first attempt to combat farmer poverty.

Third-party certification schemes, corporate sustainability programmes, and government-guaranteed minimum prices in both countries have aimed to raise living standards for farmers.

Still, a Fairtrade International survey last year found that just 12% of Ivorian cocoa-farming households earned $2.50 per person per day, a level it calculated to be the living income benchmark.

Writing by Joe Bavier, editing by Deepa Babington and Jane Merriman