Video Transcript:
--------
When it comes to The Cocoa and Chocolate industry, the income earned from global cocoa production remains less than 10% of global chocolate sales.
The Chocolate industry is worth an annual average of US$130bn, whereas the Cocoa sector is worth around US$12bn annually. This inequality that the over 2m Smallholder Cocoa farmers face made Fairtrade’s expansion into the Cocoa sector good news.
We saw it as good news because Fairtrade’s pitch to smallholder cocoa farmers was to guarantee them a Fairtrade Minimum Price (FMP) and Fairtrade Premium.
But how can Ghanaian Cocoa Farmers benefit from these Fairtrade incentives?
They would first need to be certified members of Fairtrade, and Second, #farmers need to go out there and find buyers willing to buy on fairtrade terms.
So, let’s start with Membership.
For Cocoa Farmers to benefit from these two primary value propositions from Fairtrade, they first need to be members of the Fairtrade certification through their cooperative societies. Farmers, through #cooperative societies, need to pay fixed and annual fees to Fairtrade. But how many fees do these farmers pay?
Fairtrade, through their auditor Flocert has an online calculator, i.e., https://lnkd.in/eg472K63.
So, I visited the site on the 31st of October 2022 to test the calculations.
For a cooperative society with 20 members with one product category (i.e., Cocoa beans), zero processing plants and zero sub-contractors, these are the fees to be paid for the 1st year:
An application fee of GH¢7,874 or US$562 and a 1st-year certification fee of Gh¢21,533 or US$1,538, a total of Gh¢29,407 or US$ 2,101 in fees only for year one.
In Year 2, the certification fee of Gh¢17,561 or US$1,254. So, they pay all these fees regardless of whether their beans would be purchased on Fairtrade terms.
I am writing a massive article on the email-based interview I had with Fairtrade to explore their operations and certification in detail. It will be ready for publication before the end of November 2022. The next point is that the Farmer needs to sell their cocoa beans to a buyer willing to buy on Fairtrade terms.
According to Fairtrade, The Farmer must “demonstrate that Fairtrade market potential for your product for at least two years. Market potential or demand can be demonstrated through a letter of intent or a similar document of a (prospect) end buyer that indicates a two years commitment and estimated volumes to be bought under Fairtrade terms”.
So, let’s say the Ghanaian Cocoa Farmer has found this letter of intent and has paid all the Fairtrade fees.
Do they then benefit from Fairtrade Minimum Price and Fairtrade Premium?
Fairtrade Minimum Price (FMP)
Legally all Ghanaian Cocoa Farmers are not allowed to sell their beans directly to buyers but solely to Ghana Cocoa Board through Licensed buying companies (LBC).
The Farmers’ beans are purchased at a Farmgate/producer price determined by Ghana Cocoa Board.
Ghana Cocoa Board then sells the beans at any price they please to local and international buyers.
The farmgate/producer price is a percentage of the world market, meaning farmers only get a portion of the world market price.
The Fairtrade Minimum price is linked to the World Market price received by the Ghana Cocoa Board instead of the farmgate/producer price that the farmer gets.
So Ghanaian Fairtrade Farmers do not and have not benefitted from the “Fairtrade Minimum Price” as opposed to their counterparts in Cameroon, Nigeria, who have the policy space to sell directly to any buyer and hence can benefit from it.
How about the Fairtrade Premium (FP)? Do Ghanaian Fairtrade Cocoa Farmers benefit from it?
The Fairtrade Premium was US$200/mt for over 20 years until 2019/20 when it was increased to US$240/mt.
Fairtrade claims they do not have any contract with smallholder farmers but rather with the cooperatives they are members of.
So, these corporate only receive a Fairtrade Premium when a fairtrade buyer buys their beans.
This means that after all the investment they incur annually to be a member of Fairtrade and to manage their farms according to Fairtrade’s certification requirements, they can’t be assured that these beans will be purchased on Fairtrade standards.
According to Fairtrade’s Data, only 8% of the produced cocoa beans were sold on Fairtrade.
This means 92% of Fairtrade-produced cocoa beans were sold as common beans without access to the Fairtrade benefits they were promised.
This also means Fairtrade syphoned money from farmers in fees and policed farmers to incur extra costs to meet their certification requirements but did not receive any premium in return.
What You Do Not Know About Fairtrade's Operations in the Ghana Cocoa Sector