WCF President Speaks at ICCO Meeting on Cocoa Market Developments

July 19, 2017

Richard Scobey, President of the World Cocoa Foundation, represented WCF at a Meeting of Multi-Stakeholder Platform on Cocoa Market Developments convened by the International Cocoa Organization (ICCO) on July 19-20, 2017 in Brussels, Belgium. The Meeting was attended by representatives from government and private sector as well as civil society organizations in exporting and importing member countries of the ICCO. He delivered the following statement at the Meeting.

WCF STATEMENT FOR ICCO MEETING IN BRUSSELS

The vision of the World Cocoa Foundation is a sustainable and thriving cocoa sector – where farmers prosper, cocoa growing communities are empowered, human rights are respected, and the environment is conserved.

WCF, which has more than 100 members throughout the supply chain is focused on the longer-term sustainability of the cocoa sector. It is not our role to comment on the short-term impact, or commercial implications, of changing supply and demand conditions. These issues are best addressed independently by our member companies on the ground.

While market fluctuations are a normal response to changing supply and demand conditions, we believe that current market developments threaten to undermine longer-term sustainability of the value chain. Under current conditions, cocoa farmers are going to earn less income, which may exacerbate poverty and undermine the food, health, and educational security of the household. Cocoa growing communities will likely have fewer resources to self-finance important community assets like safe drinking points and school management committees. Producing governments may see reduced tax revenues that are critical for financing high priority public expenditures like rural infrastructure.

In view of these impacts, we welcome the opportunity for open dialogue among all actors in the supply chain about how to boost incomes and ensure sustainable livelihoods for cocoa farmers. We particularly appreciate that ICCO is reaching out to industry, producing governments, and consuming governments for joint action, since this is a shared accountability among all of us. WCF notes the thoughtful paper from VOICE Network, which provides helpful ideas on the way forward.

This multi-stakeholder dialogue, and the industry response to current market developments, must always be consistent with our obligations under the antitrust laws. While companies may collectively discuss ways to encourage the producing governments to help promote sustainable cocoa prices for farmers, any discussions with the potential to affect competition between the companies must be avoided. We will therefore not discuss any individual company contracts, purchase prices, margins, premiums, or any other competitively sensitive terms. Likewise, we will not enter into any discussion about limiting the freedom of any company to choose its own method of doing business.

Industry, producing and consuming governments, and civil society organizations all share the same goal – we want to see a robust and competitive global marketplace that provides strong incentives and sustainable livelihoods for cocoa farmers.

WCF and our member companies are already taking several critical steps to strengthen the profitability of cocoa farming, boost farmer income, and drive demand:

  • We provide premiums payments for certified and/or verified sustainable cocoa on top of official prices, which increase farmers’ incomes and provide critical financing for the development of cocoa-growing communities.
  • We invest hundreds of million dollars every year to improve the long-term productivity and profitability of cocoa farming in all the major origin countries through individual company sustainability programs and pre-competitive collaboration like CocoaAction. These private sector investments, which leverage large funding from governments and development partners in joint public-private partnerships, are designed to professionalize, empower, and motivate farmers to stay in cocoa for the longer-term.
  • We spend several billion dollars every year to develop and expand markets for cocoa and chocolate and promote responsible consumption around the world. With the slow-down of demand in more mature markets like Europe and North America, we are particularly focusing on emerging economies like India, China, and Brazil, where expanding middle classes have fueled much of the growth in global chocolate consumption in recent years.

Going forward, we urge six core steps to strengthen the enabling business environment for cocoa sustainability and profitability.

  • First, there is need for better coordination of national production policies and programs of cocoa producing countries to ensure stable and sustainable long-term supply management consistent with global demand projections, as agreed under the International Cocoa Agreement. ICCO plays a critical role in maintaining up-to-date statistical information on global supply and demand, and prices and stocks of cocoa, and facilitating discussion among producing countries on national production policies. We also note and welcome the new technical collaboration between Ghana and Cote d’Ivoire for joint action for cocoa sustainability.
  • Second, industry, governments, and development partners need to work together to accelerate investment in long-term cocoa sustainability programs like CocoaAction in West Africa. Joint action is required to boost farmer productivity and profitability in environmentally suitable areas, through, inter alia, improved planting materials, good agricultural practices, financial inclusion, and agriculture and trade policy reforms. Most importantly, as companies continue to invest in the development of professionalized and empowered cocoa farmers, governments will need to ensure a good safety net for smaller farmers who will transition from marginal cocoa production into other sustainable activities, in line with their approved national rural development and poverty reduction strategies.
  • Third, our members are committed to a stronger focus on income diversification of cocoa farmers, particularly through development of mixed agro-forestry systems that combine cocoa, fruit, and other tree plantings, agricultural inter-cropping, and other income generating activities. This will increase household incomes, and help diversify production and price risks. We are currently reviewing how to scale up our support for farmer income diversification in CocoaAction in West Africa as well as in individual company sustainability programs.
  • Fourth, our goal must be “more cocoa from less land.” As we seek to improve the profitability of cocoa production, governments need to enact complementary measures for improved land-use planning and enforcement of national environmental regulations to ensure that cocoa is grown only in environmentally sustainable areas. Otherwise, we will be caught in a recurring vicious cycle of higher prices inducing over-supply from marginal lands. We hope the new Cocoa and Forests Initiative launched by companies and the governments will help Ghana and Cote d’Ivoire end the encroachment of smallholder cocoa farming in protected areas, and promote more sustainable landscape management.
  • Fifth, we encourage increased transparency and discussion about the way government-regulated prices and cocoa taxes are determined in producing countries, and about the spending of these public cocoa tax revenues. The recent report commissioned by the Dutch Parliament highlights that farm-gate prices could be raised by improving the transparency, efficiency and effectiveness of the regulated pricing system and increasing private sector participation in input distribution in Ghana and Cote d’Ivoire.
  • Finally, we will continue to invest significantly in the development and expansion of markets for cocoa and chocolate around the world – and we strongly support the goal of the origin governments to promote cocoa consumption in their own countries. ICCO plays a critical role in the coordination of activities to promote consumption, and we encourage collaboration with relevant development partners to strengthen the efforts of ICCO and producing country governments. 

Many cocoa farmers are facing economic difficulties. All of us – ICCO, industry, producing and consuming governments, development partners, civil society actors, and, most of all, farmers – need to work together to solve this. Industry stands ready to do our part.