How Côte d'Ivoire is making cocoa sustainable

The sustainability of cocoa production in Côte d’Ivoire has become one of the top priorities of both public and private stakeholders. Chief among the segment’s concerns are increasing the incomes of cocoa farmers and achieving a more equitable distribution of the value generated by the global cocoa industry. Other sustainability initiatives key to the public agenda include those intended to combat plant diseases and reverse the impact of deforestation.

Pricing Agreement

Côte d’Ivoire and Ghana imposed a fixed premium in July 2019 of $400 per tonne on all cocoa contracts signed for the 2020/21 season. This premium – known locally as the living income differential (LID) – replaced the proposed floor price of $2600 per tonne that had been agreed between cocoa buyers and the governments of the West African neighbours the previous month. The aim of the LID is to raise the income of farmers to a consistent 70% of the targeted $2600-per-tonne price, or approximately $1800. Buyers are to pay the LID whether cocoa prices are below or in excess of $2600. If global prices exceed $2900, the LID will be paid into a stabilisation fund, from which the government can draw to continue paying farmers the targeted $1800 in the event that market prices fall short of $2600. Both Côte d’Ivoire and Ghana guarantee farmers a price at the beginning of a season: in Côte d’Ivoire this was CFA825 ($1.42) per kg in the 2019/20 season, or CFA825,000 ($1420) per tonne.

Whether the application of the LID will continue past the 2020/21 harvest will likely depend on market reactions and the outcome of the 2020 presidential election in October. Cocoa traders have widely expressed doubts about the sustainability of the LID in light of market forces that might lead buyers to seek other suppliers. However, Françoise Mariame Koné Bédié, CEO of the Professional Group of Exporters of Coffee and Cocoa, the oldest cocoa and coffee exporter association in the country, told OBG that the LID is likely to remain in place given the significant support it represents for the country’s farmers. Moreover, several of the world’s largest chocolate makers have publicly expressed their support for measures to improve the livelihoods of cocoa farmers. At the same time, one of the main factors that will determine the LID’s sustainability is whether Côte d’Ivoire sells the entirety of its cocoa production with the LID applied.

Production

In a bid to boost cocoa prices, the Coffee and Cocoa Council (Conseil du Café-Cacao, CCC) announced in July 2019 that it would seek to cap production at 2m tonnes for the 2020/21 season – 10% below the 2.2m tonnes produced during the 2019/20 harvest. To implement this production cap, the CCC requested that exporters stop distributing seedlings to farmers. However, it is unclear how far this can be enforced, given the thousands of small farmers involved in production. In addition, farmers throughout Côte d’Ivoire’s major cocoa-producing regions have reportedly stated that they plan to maintain – if not expand – their production levels in the upcoming harvest.

Given the importance of cocoa and coffee as two of the country’s top exports, the government has been supporting the cultivation of these crops through its Quantity, Quality, Growth (Quantité, Qualité, Croissance, 2QC) programme. The 2QC strategy was launched in 2014 and is set to run until 2023. Building on the previous policy document that ran from 2009 to 2013, the strategy aims to support the sustainable cultivation of cocoa and coffee, and promote the socio-economic well-being of farmers in these segments.

As part of 2QC, the CCC has launched several initiatives to support the productivity of cocoa orchards. These include training farmers in agricultural best practices, distributing seeds and providing plant protection products. According to a February 2019 report by the Ministry of Economy and Finance, the CCC had distributed enough enhanced cocoa seeds to grow 50,000 ha, in addition to insecticides and fungicides for the treatment of 1m ha and 330,000 ha, respectively.

Swollen Shoot

2QC also aims to combat the spread of swollen shoot, a viral disease that first reduces the yields of cocoa trees by up to 70% and then kills them within a few years. Swollen shoot thus poses a significant threat to production. Throughout 2006 and 2007, swollen shoot reportedly spread across the central Ivorian regions of Bouaflé, Oumé and Sinfra, where the disease afflicted 70% of cocoa fields. This led to a decrease in their production over the 2009-17 period of around 60%, according to the local authorities. A three-year initiative began in January 2018 to uproot 300,00 ha of infected orchards, and Côte d’Ivoire and Ghana launched a joint initiative in August 2018 to tackle the disease along their shared border areas.

Deforestation

Public and private stakeholders have recently taken steps to address cocoa-related deforestation. In July 2017 a new forest code, Law No. 2019-675, was adopted to prevent any additional deforestation and forest degradation by, for example, prohibiting agricultural activities in certain protected lands. A component of the strategy includes the creation of a fund to finance deforestation efforts, which will be informed by the findings of a sector risk analysis undertaken by Bloomfield Investment at the end of 2019. Additionally, the establishment of a new system to trace the origin of cocoa production within the country was announced by the CCC in October 2019. A key driving force behind the new traceability system is to ensure that cocoa production does not originate in lands protected under the forest code.

Measures have also been taken by private companies to address cocoa-related deforestation. In March 2019, 34 companies announced action plans to end deforestation associated with the cocoa industry. The action plans are part of the Cocoa and Forests Initiative (CFI), a public-private partnership organised by the World Cocoa Foundation (WCF), IDH Sustainable Trade Initiative, the Prince of Wales’ International Sustainability Unit, and the governments of Côte d’Ivoire and Ghana. According to the WCF, the companies that joined CFI account for 85% of global cocoa usage.

The action plan commits companies to protecting and restoring degraded forests, promoting sustainable agricultural practices and raising farmer incomes, while also bolstering the involvement of communities affected by deforestation. To be executed by 2022, the plans prioritise five regions that are home to national parks, reserves and classified forests: Guémon, Cavally, Nawa, San-Pedro and La Mé. Key aims include stopping the conversion of any additional forest land for cocoa production, and eliminating the production and sourcing of cocoa from national parks and reserves.

Tackling environmental issues is set to boost crop production and ensure the security of the cocoa segment, not only in terms of environmental preservation, but also economic stability. While the full effects of pledges made in 2019 remain to be seen, with a clear emphasis on strategies to leverage the country’s agriculture potential, cocoa is set to remain atop the public agenda and offer a promising opportunity to investors.