Global Market Report: Cocoa prices and sustainability – World

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Producing cocoa compliant with voluntary sustainability standards (VSS) can improve farmers’ prices, incomes, and climate resilience efforts, according to new research released today from the International Institute for Sustainable Development (IISD).

“Up to 6 million farmers work directly within the cocoa sector, underpinning the livelihoods of 50 million people,” said Vivek Voora, a Senior Associate with IISD. “Moving the global cocoa sector towards sustainability is critical for people and the planet.”

The research found nearly 85% of VSS-compliant cocoa came from Africa, led by Côte d’Ivoire, Nigeria, and Ghana.

“In just 10 years, global VSS-compliant cocoa production grew from 1.5% of total cocoa production in 2008 to between 27% and 47.3% in 2019,” added Voora.

However, 2 million cocoa farmers live under the poverty line and do not earn enough money to support their livelihoods.

Low farm gate prices mean cocoa farmers cannot achieve a decent standard of living while bearing the rising costs of production, forcing some to abandon their homes to migrate into cities in search of more prosperous opportunities.

This causes unpredictability in the sector, which is already reeling with climate change disruptions and high volatility and price drops in the international market causing uncertainty for farmers’ incomes.

“Farmers selling VSS-compliant cocoa can get up to 30% higher prices than those growing conventional cocoa, which can protect them from international price swings and improve their livelihoods,” said Steffany Bermudez, IISD policy analyst. “However, this doesn’t guarantee higher profits due to the lack of demand, rising costs of production, and certifications costs.”

Sustainability standards, such as organic, Fairtrade, UTZ, and Rainforest Alliance, are one tool among others to support smallholder farmers to increase their prices and incomes.

“VSS’s effectiveness is limited by power imbalances along the value chain, global supply and demand dynamics, and the influence of cocoa’s future prices on the current cocoa economy,” added Bermudez.

IISD’s new report Global Market Report: Cocoa Prices and Sustainability provides detailed recommendations for actors along the value chain to improve sustainability in the cocoa sector and support farmers’ prices and incomes, such as:

  • Enhance price transparency and accountability across the value chain including price information systems allowing farmers accessing real-time price updates.
  • Account for the environmental and social costs of cocoa production when price setting in the international market to favor more sustainably grown and purchased cocoa.
  • Increase demand and value creation for VSS-compliant cocoa in producing countries by processing cocoa domestically to increase profits for farmers and processors.
  • Promote better trade relations among value chain actors, including rewarding farmers for adopting sustainable cocoa practices that yield positive results, and implementing living income approaches based on cocoa farmers’ realities.

Quick Facts

  • VSS-compliant cocoa grew at a CAGR of 34% to 41% between 2008 and 2019 but may be slowing as its CAGR dropped to 0% to 8% from 2014 to 2019.
  • About 90% of growers are smallholder farmers, cultivating cocoa on lands smaller than 5 hectares.
  • Only 71% of more sustainably produced cocoa was sold as certified between 2008 and 2019 despite increased demand for VSS-compliant cocoa.
  • Climate change is disrupting the global cocoa value chain as regions become less suitable due to high temperatures or severe droughts, including West Africa which saw a 5.5% drop in production among Ghanaian cocoa farmers from 2018 to 2019.
  • In 2020, 35% of the cocoa sourced by the eight largest cocoa traders and grinders was compliant with a VSS or corporate sustainability initiative, a 4% increase from 2017 representing about 226,000 mt. Sixty-four per cent of cocoa purchased by five of the largest chocolate manufacturers was also sourced more sustainably, a 15% increase from 2017, representing about 288,000 mt.

Contact

For more information or to set up an interview, contact media@iisd.org.

About the Sustainable Commodities Marketplace Series

This report is part of the Sustainable Commodities Marketplace Series of global market reports that analyze agricultural commodities to foster transparency, knowledge, and strategic decision making for sustainable development. The series covers bananas, cotton, cocoa, coffee, palm oil, soybeans, sugar, and tea. The series is published by IISD’s State of Sustainability Initiatives (SSI), an international research project that aims to advance sustainable and inclusive value chains. It provides credible and solution-oriented analysis and dialogue on voluntary sustainability standards and their potential to contribute to sustainable development outcomes.

About the International Institute for Sustainable Development

Tea International Institute for Sustainable Development (IISD) is an award-winning independent think tank working to accelerate solutions for a stable climate, sustainable resource management, and fair economies. Our work inspires better decisions and sparks meaningful action to help people and the planet thrive. We shine a light on what can be achieved when governments, businesses, non-profits, and communities come together. IISD’s staff of more than 120 people, plus over 150 associates and consultants, come from across the globe and from many disciplines. With offices in Winnipeg, Geneva, Ottawa, and Toronto, our work affects lives in nearly 100 countries.

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