We know that farmers are earning revenues from cocoa that are far below what they need to enjoy a living income. The challenge we now face is how to change this? How can we assist farmers to grow their incomes and bridge the gap, and moreover, how might we build resilience and security into livelihood systems as we go?
Our vision for living income is both radical and simple: all cocoa farmers should be able to earn an income that provides them with a decent standard of living, sufficient to cover the cost of sustainable production as well as everyday expenses like a nutritious diet, children’s education and healthcare. With some complex mathematics it’s possible to see that the average cocoa farmer – even with a decent yield (800kg/hectare) and reasonably sized plot of land (5.3 hectares) – are earning only 48% of what s/he needs to meet a living income. To put that into context, farmers in Cote d’Ivoire are earning around $ 1,378per tonne at farmgate, whereas our Fairtrade Living Income Reference Price (LIRP) – the target price we calculate a farmer should be paid to receive a living income - is $2,200 per tonne.
Cocoa is an extreme example of why Fairtrade’s Living Income Reference Price is a powerful measure of the size of the income gap. To exit poverty, farmers must more than double their revenues. However, as a synthetic benchmark based on the concept of an ‘average farmer’ who doesn’t really exist, its analytical power is limited. Turning theory into practice requires us to have a nuanced understanding of different farmers’ real-world circumstances and to evidence their pathways toward increased incomes. We also need to go far beyond a single measure like paying a higher price. For change to occur, deep structural and power dynamics causing the living income conundrum in the first instance must be rebalanced.
From October 2020, the Ivorian and Ghanaian Governments will be introducing a new Living Income Differential of $400 per tonne – fixing the farmgate price to at least $1820 per tonne, regardless of a Coronavirus-induced dip in the market price for cocoa. Although this falls short of Fairtrade’s LIRP, nevertheless it will constitute a sudden and very significant increase in revenue. Are farmers ready and equipped with the resources, tools and knowledge they need to take advantage of this opportunity?
Fairtrade’s next step in cocoa is to lay the foundations for cooperatives to lead the way in developing and evidencing farmer-centric living income strategies. Our cooperatives have unparalleled insights into the smallholder livelihood system and cocoa’s role within it. Because they are farmer-owned and reach right down to the individual cocoa household level, they’re able to capture real-time quantitative and qualitative baseline data. In short, they know will know better than anyone what it is going to take - across all the different types of family, community, financial, agronomic and even Coronavirus related realities – to close the living income gap. Moreover, thanks to Fairtrade Africa’s work in supporting cooperatives to be well governed and accountable, they have the legitimacy to stand behind farmers as they make highly risky decisions on how best to invest their time and money whether by optimizing their cocoa yields, or better managing their exposure to cocoa by diversifying into alternative crops.
Seen in this light, the new African Regional Cocoa Standard’s focus on building empowered cooperatives with their own internal management systems (amongst many other requirements) is a reason for hope. Indeed, cocoa brands and traders would do well to ensure that their own initiatives do not inadvertently undermine independent, farmer led cooperatives whose reach, knowledge and deep influence within cocoa farming communities will be vital if we’re to permanently close the living income gap in the decade to come.