Washington, DC – Fairtrade International is increasing the Fairtrade Minimum Price for conventional cocoa from $2,000 to $2,400 per metric ton at the point of export (FOB), marking a 20 percent increase. For organic cocoa, the Fairtrade price will be $300 above the market price or the Fairtrade Minimum Price, whichever is higher at the time of sale. This is a change from the current minimum fixed price of $2,300 per metric ton for Fairtrade certified organic cocoa.
World cocoa prices plunged by more than one-third last year, and it is farmers who bore the brunt of that price volatility, the organization states. Fairtrade is the only certification scheme with a mandatory minimum price.
The current cocoa price set by the government of Côte d’Ivoire, the world’s biggest cocoa producer, is $2,124 at FOB, with Fairtrade buyers paying farmer organizations the differential when the Fairtrade Minimum Price is higher.
The organization also announced that the additional Fairtrade Premium will increase from $200 to $240 per metric ton, the highest fixed premium of any certification scheme. This is an amount on top of the selling price, paid directly to farmer organizations to spend on projects of their choice. The premium helps build strong and viable cooperatives that can respond to their members needs and strengthen them as long-term business partners for buyers, according to Fairtrade International. In 2017, Fairtrade cocoa farmer cooperatives earned nearly $43 million in Fairtrade Premium.
The new price structure, agreed by the Fairtrade Standards Committee, a multi-stakeholder body which includes farmer and trader representatives, takes effect on October 1, 2019. The decision follows a lengthy consultation process across the cocoa supply chain with Fairtrade farmers, traders, manufacturers, and chocolate brands.
The challenges in the West African cocoa sector are huge, with a Fairtrade study in April 2018 showing 58 percent of Fairtrade certified cocoa-farming households in Côte d’Ivoire had incomes below the extreme poverty line. The new Fairtrade Minimum Price will allow average Fairtrade cocoa-growing households to earn above the extreme poverty line. Fairtrade expects to review its cocoa Minimum Price and Premium again in three years.
“This is good news for West Africa’s cocoa-growing communities,” says Fortin Bley, an Ivorian cocoa farmer and chairperson of Fairtrade Africa’s West African Network. “Farmers have been badly squeezed by low world prices, so the higher Fairtrade Minimum Price and Premium help to level the playing field for a more sustainable future.”
Unlike the Fairtrade Minimum Price, the Living Income Reference Price is not mandatory. The increase in the Fairtrade Minimum Price closes about a quarter of the gap between the average Ivorian cocoa farmer income and a living income, as a first step in a gradual and collective approach to bridging the difference.
Darío Soto Abril, global CEO of Fairtrade International notes: “The price that farmers are paid is a critical aspect that needs to increase so that cocoa farmers can afford a decent standard of living for their families. We are committed to working together with our partners, and welcome other bold efforts across the industry to make living incomes a reality.”
Fairtrade will develop projects with committed partners to test the Fairtrade Living Income Strategy, including price and diversification initiatives, and share learning that will move the cocoa industry closer to supporting a living income. C&ST