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Farmers drop off their cocoa bean harvest at a community buying centre in Daloa \u00a9 Paul Ninson\/Bloomberg<\/p>\nThe plants are old, the earth is tired, says farmer Kouadio N\u2019Guessan Yves, stamping his foot into the red dirt and running his hand up a gnarled trunk. The rows of cocoa trees stretching towards the sun were planted by the Ivorian\u2019s grandfather or great-grandfather, and no one since then has had the cash to plant new ones. <\/p>\n
Down a narrow, dusty path in a tiny village near the town of Daloa, Yves\u2019s neighbours pull apart the yellow cocoa pods and spread the white, fleshy beans across tarpaulins by hand. Once the sun has browned and sweetened them, the farmers carry sacks of cocoa down potholed roads to market on rusty motorbikes or on foot. Even four-wheel-drive vehicles struggle with the terrain. <\/p>\n
In many such villages in Ivory Coast, which produces 40 per cent of the world\u2019s beans, there is little evidence of a global cocoa bull market that has sent previously subdued prices in London and New York skyrocketing in recent years.<\/p>\n
\u201cThe global market doesn\u2019t reach the producer,\u201d said Yves. In Daloa, he says, most farmers get the \u201cbocha\u201d price \u2014 the rate set by government regulators.<\/p>\n
The bocha mechanism, which sets the price for each season in advance and which dates back to the country gaining independence from France in 1960, was designed to protect Ivorian farmers from the volatility of global commodity markets. But the gap between the sky-high prices of recent years and the bocha price has widened sharply, starving farmers of big gains.<\/p>\n
Farmers drop off their cocoa bean harvest at a community buying centre in Daloa \u00a9 Paul Ninson\/Bloomberg<\/p>\n
Regulated prices are also disrupting the normal self-correcting mechanism within commodity markets, whereby high prices spur greater production. Many producers do not have the cash to reinvest in order to replace ageing trees or buy pesticides or fertiliser. As a result, output in the world\u2019s biggest cocoa producer has stagnated, keeping global prices high, which has meant higher chocolate prices for consumers.<\/p>\n
\u201cWhen prices were at their highest, farmer income [in Ivory Coast] actually went down significantly, not up,\u201d said Jonathan Parkman of broker Marex. As a result, he said, despite high prices, farmers lack the capital to increase inputs and boost production. <\/p>\n
Since the start of 2023 cocoa futures in New York and London, which for years had traded in a relatively narrow band, have more than tripled as supply has fallen short of demand. Most of the sector\u2019s problems lie in Ivory Coast and Ghana, which together produce about two-thirds of the world\u2019s cocoa beans. <\/p>\n
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<\/p>\n
Swollen shoot virus and black pod disease, a fungal infection that rots cocoa pods, have both swept through plantations. Heatwaves and heavy rainfall, as a result of climate change, have hurt yields by making trees less productive and encouraging the diseases\u2019 spread. Chronic under-investment by cash-strapped smallholder farmers has left ageing plantations vulnerable to both disease and adverse weather.\u00a0<\/p>\n
But the supply crunch has been exacerbated by the two countries\u2019 forward selling policies, say analysts. Instead of linking farm gate prices to prices on global markets, Ivorian and Ghanaian regulators \u2014 the Conseil du Caf\u00e9-Cacao (CCC) in Abidjan and Cocobod in Accra \u2014 set a fixed price at the start of each growing season. That is based on forward contracts struck with exporters months in advance. Farmers say they have no input in to the process. <\/p>\n
In 2022 and 2023, both countries\u2019 regulators were warned by trading houses and processors that there was a problem with swollen shoot but \u201ccompletely ignored [these warnings] and just went ahead as if nothing had changed\u201d, said Parkman.<\/p>\n
As a result, Ivory Coast and Ghana oversold by hundreds of thousands of tonnes. Export companies were left struggling to fulfil obligations based on production that never materialised, pushing up global prices.\u00a0<\/p>\n
\u201cThe reason farmers in the Ivory Coast are getting 25 per cent of what every other cocoa farmer in the world is getting is because their government screwed up its forward selling policy,\u201d said Parkman. <\/p>\n
With contracts locked in far below spot prices, farmers have lost out.<\/p>\n
\u201cToday, the cost of production is higher than the price of cocoa, at least in our area,\u201d said Yves. \u201cTo produce one kilogramme of cocoa, we have to spend 1,250 CFA francs [$2.21, or $2,021 per tonne]. So with the national price, once you subtract the production costs, there\u2019s practically nothing left.\u201d<\/p>\n
Unable to pay for his children to go to school, a few years ago Yves started selling to the Kapatchiva co-operative. Kapatchiva works with Tony\u2019s Chocolonely, a Dutch chocolate company that pays a premium above the farm gate price, using a so-called Living Income Reference Price model designed to cover basic household costs and farm inputs. In addition to the price premium, farmers in the programme receive support with composting and pest control. However, demand from Tony\u2019s is not enough to offer such deals to all of the country\u2019s more than 1.2mn cocoa farmers. <\/p>\n
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Tony\u2019s Chocolonely pays a premium above the farm gate price for cocoa \u00a9 Simon Evans\/Alamy<\/p>\n
Such initiatives remain the exception, said Rapha\u00ebl Felenbok, a\u00a0cocoa supply chain expert. The large majority of Ivorian farms still yield less than 500kg per hectare and farmers live well below the World Bank\u2019s extreme poverty threshold of $3 per day, he added.<\/p>\n
In general, incomes at the farm level remain too low to support replanting or investment in fertilisers and pesticides, he added. The result is a deepening cycle of ageing trees, underused inputs and flat yields, precisely when the global market needs more cocoa, not less.<\/p>\n
The CCC, the Ivorian regulator, says that about 60 per cent of export revenues reach farmers. The remainder, it says, is used to finance road-building, as well as inputs \u2014 for instance, fertilisers or pesticides \u2014 and general support for the sector. But several farmers said they rarely see these benefits on the ground. Fertilisers arrive late or not at all, while pesticides are often unavailable. As a result, productivity has barely improved in decades. <\/p>\n
Antonie Fountain, managing director of Voice, which calls for reform of the cocoa industry, points to how unevenly revenues are distributed. <\/p>\n
\u201cI think there\u2019s a lot of accountability lacking as well with the Ivorian government. So where are you spending the money?\u201d he said.<\/p>\n
The 60 per cent figure is a \u201cterrible percentage\u201d, said Parkman, adding that not all the remainder is spent in the supply chain. \u201cWhere does the balance go?\u201d <\/p>\n
The CCC and Ivory Coast\u2019s agriculture ministry did not respond to requests for comment. <\/p>\n
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<\/p>\n
While Ivorian farmers struggle and production falters, growers in other parts of the world are cashing in on the price surge, Parkman said. The problem for the chocolate industry, hammered by high cocoa prices, is that unlike annual crops such as soyabeans, which can respond quickly to price signals, cocoa trees take years to mature.\u00a0<\/p>\n
\u201cYou only go over the borders in any direction other than Ghana, and you\u2019ll find a lot of very happy cocoa farmers,\u201d said Parkman.\u00a0<\/p>\n
For the global chocolate industry, which relies on Ivory Coast for nearly half its cocoa, this means the pain of higher prices will be prolonged.\u00a0Ivorian producers, meanwhile, risk losing their market share.\u00a0<\/p>\n
\u201cThe writing\u2019s been on the wall for the cocoa market for a long time,\u201d said Parkman. \u201cThere\u2019s been a way too high a concentration of cocoa production in one geographical area, which makes it risky when it comes to the weather and politics.<\/p>\n
\u201cIf you want to invest in a country to grow cocoa at the moment, process cocoa at the moment, the bottom of your list is Ivory Coast and Ghana, because of the way they\u2019ve behaved over the last few years. Bottom of the list.\u201d<\/p>\n