Emmanuel Frimpong, 32, is a cocoa farmer in Ghana, mostly by default. He has a university education but couldn’t find another job so he works on the family farm. “Why not?” he told me. “I’m willing to do the job.” His literacy and English skills help him serve as a liaison between his fellow farmers and the government, which is the primary price-setter for cocoa beans in Ghana.
The exorbitant prices paid for cocoa beans and chocolate products in the United States and other nations barely touch the lives of Frimpong and those around him. “The living conditions are very poor,” he told me. “The water system is very poor.” The government’s payments for cocoa beans are “a little bit low” and its support for the farmers — for example, a pesticide sprayer that must be shared by more than 100 families — is “woefully inadequate,” he said.
The poverty of cocoa farmers is sometimes seen as a moral failing of chocolate buyers or sellers, but above all it’s a market failure. In a healthy market, price spikes are self-correcting: When the price rises, production increases to take advantage of the extra profit opportunity. But farmers in Ghana and neighboring Ivory Coast, the world’s No. 2 and No. 1 cocoa-producing nations, aren’t feeling the love. Most live in poverty. They don’t have the funds for long-term investment in new cacao trees, which are the source of cocoa beans, or for adequate fertilizers, pesticides, irrigation and labor-intensive pruning.
Some farmers put more land under cultivation to compensate for falling yields, which involves cutting down primary forests. Many put children to work. Some are giving up on cocoa and turning to growing maize or rubber or selling their land for illegal, environmentally destructive open-pit gold mining.
The poorer the cocoa farmers get, the higher the prices of cocoa and chocolate rise on the world market, because the under-capitalized farmers produce fewer beans or give up entirely. It’s a destructive dynamic, or a “low-income trap” in the phrasing of the International Food Policy Research Institute.
Farmers in Ivory Coast and Ghana aren’t getting the full benefit of the run-up in world prices because of a 2018 agreement called the Côte d’Ivoire-Ghana Cocoa Initiative. Intended to protect farmers from price volatility, it enables governments to establish price floors by auctioning off purchase rights to the major international buyers, which have the option to pay premiums to individual farmers for reliability and environmental sustainability.
The government-administered system benefits farmers when world prices are low, but it’s a drag when prices are high. Despite increases in government price floors (especially for the 2023-2024 mid-crop season), cocoa farmers in Ghana and Ivory Coast are getting only about 25 percent to 30 percent of the world price for cocoa beans, “well below the 60 percent expected by the guaranteed price mechanism,” Jean Paul Aka, a cocoa expert with the United Nations Development Program in Ivory Coast, wrote to me by email.
The governments are setting aside some of the windfall from today’s high prices to compensate growers the next time prices are low, which Aka said he thinks is prudent. The stated goal of the Côte d’Ivoire-Ghana Cocoa Initiative is to “provide decent wages to cocoa producers, contribute to the protection of forests and biodiversity, and be exemplary in terms of fundamental social and human rights.” It attempts to “harmonize” production, which amounts to acting like a chocolate OPEC.
Global cocoa prices are volatile, as this chart shows. Small shifts in supply and demand result in big changes in prices. Prices, while still elevated, are well off their April peak. Complaints about government-set prices die down quickly during periods when they’re above market prices.
The farmers’ woes are amplified by climate change, which has worsened regional droughts, and outbreaks of swollen shoot and black pod diseases that decrease crop yield.
There are pilot programs to help farmers with cash transfers, farm maintenance subsidies, income diversification and payments for “ecosystem services” — primarily reforestation. “These initiatives, while promising, are not yet widespread,” Aka wrote to me.
The big chocolate companies are in on the efforts to help small-scale farmers through the World Cocoa Foundation, which is working with a German federal enterprise, GIZ, and two Dutch scientific institutions, KIT and Wageningen, on developing a standard for measuring incomes of cocoa farmers for the purpose of evaluating interventions.
A lack of reliable measurement and follow-up has impeded efforts to help the farmers, said Jane Grob, the senior director for strategic initiatives at TechnoServe, a nonprofit that seeks business solutions to poverty. “It’s a top-down approach,” she said. “No one looks at the effects on individual farmers.”
Grob said she met a farmer in Ghana who had gotten sometimes contradictory instructions on how to prune cacao trees from five different organizations. “Just getting the basic practices done right can nearly double yields,” Daniel Hamos, an associate of Grob (and, full disclosure, a friend of my family), told me.
Something’s clearly wrong when people in New York, Paris and Tokyo are paying sky-high prices for chocolate at the very same time that the people who grow the beans can’t make a living from it. I hope the multipronged effort to fix the market will finally begin to pay off for people such as Frimpong and his family.
Elsewhere: The Price of Lithium Has Crashed
Lithium is a key ingredient in electric vehicle batteries, yet the price of lithium has crashed even as sales of E.V.s have continued to rise. What gives? First, sales of E.V.s have grown more slowly than speculators had bet. Second, the high prices of 2022 spurred investment in lithium production — from hard-rock mines in Australia as well as from brine in Chile and China.
Today’s low lithium prices make electric vehicles cheaper, but they also discourage expansion of production capacity, which could eventually cause shortages. Big producers say the long-term fundamentals remain strong. “We’re not scared off by low prices, and we’re not drawn in by high prices,” Patrick Howarth, the head of ExxonMobil’s lithium division said, according to Reuters.
Quote of the Day
“The real problem of humanity is the following: We have Paleolithic emotions, medieval institutions, and godlike technology.”
— E.O. Wilson, quoted in “An Intellectual Entente,” Harvard Magazine (Sept. 10, 2009)
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