As top global cocoa producers’ methods to combat farmer’s poverty continues to rattle the market, its finality and permanency were confirmed at this year’s World Cocoa Foundation (WCF) Partnership Meeting.
The CEO of Ghana’s Cocoa Board (Cocobod) Joseph Boahen Aidoo, outlined during the event in Berlin that the plans agreed by both countries are due to approach completion by the end of 2019 and be finalised by early 2020.
IEG Vu spoke to Aidoo on the sidelines of the conference, asking to clarify what will be included in the proposals from both countries, as well as whether a decision has been made on the much-anticipated production ceilings.
There’s been a lot of confusion over the LID over the last few months, could you just clarify, in your own words, what exactly it will entail?
The LID is more or less like a premium of USD400/tonne, that buyers of cocoa in Ghana and Ivory Coast have to pay. This is in addition to what happens at the terminal market. It will be a special fair income to be delivered to cocoa farmers in both countries. There is the consensus everywhere, at ICCO meetings, WCF meetings, that the cocoa farmer is poor. The cocoa farmer is the weakest link in the value chain, and everyone is saying that we need to improve upon the farmers income. For 20 years there have been schemes that haven’t worked and not been effective in achieving this. Therefore, the LID has been introduced to deliver that fair income to the farmer in addition to whatever the market price determines.
So, does this now replace the minimum price or is the LID still in addition to this?
Yes, yes, in addition to this. Before this we already agreed on USD2,600/tonne and the farmer should not get less than 70% less of that, which works out at USD1,800. So, the average cocoa farmer in Ghana and Ivory Coast should not get less than USD1,8000. And we are going to do that by law.
Which you stated during your presentation today (October 23) would be done by December?
Well, not exactly. By December we are hoping for our proposals to have gone to parliament. We have just finished our sessions with cabinet, so from there we go to Parliament, and once it goes through the national assembly, it becomes a law. So hopefully it will become law by early January next year. The industry already agreed to pay, so now part of the obligation by the producing countries Ghana and Ivory Coast is to oblige by this law.
Will the proposal contain a production ceiling? We have already heard Ivory Coast’s will be 2 million tonnes, what about Ghana’s?
The production ceiling matter will be decided and outlined by the charter for Ivory Coast and Ghana, but we are definitely setting a production ceiling. However, the issue with bringing equilibrium in the cocoa market doesn’t rest just with supply and demand. Essentially consumption is very important, and I always saw that consumption in Europe is very stagnant, flat. Consumption in US is also flat and that’s a huge market. So, we need to stimulate consumption in Europe and America. And also develop consumption of cocoa in emerging markets, even if Africa. We are sleeping giants as we don’t consumer chocolate and we need to wake Africa up to also consume cocoa products. The potential there is huge.
Looking at Ghana’s output in 2019/20, volumes of cocoa are still likely to be lower, yes?
Yes, certainly it is going to be lower because of the swollen shoot virus. Our forecast should be of around 850,000 tonnes. In the northern part of our cocoa region, we lost 200,000 tonnes of cocoa to this. However, the intervention that we put in place will increase productivity per hectare. The programme we are running now, we call it vertical productivity not lateral. So, 1 acre should be able to give you 10 bags, instead of 10 acres to give you 10 bags. That is the programme we are doing now. So, the farmers use less land and increase productivity. And to ensure no deforestation, that is the model we are running now.
More on Western Africa’s LID and revision of sustainability programmes from the WCF event still to come…