When Global Prices Don't Reach Smallholder Cocoa Farmers Pockets

The Unseen Cost of Chocolate's High Stakes to Smallholder Cocoa Farmers

Sitting here, in the corner of my room, a world away from the lush greenery of my parents' cocoa farm in Ghana, a journalist friend sent me an article from the Financial Times. It spoke of a record-breaking surge in cocoa prices, a trend driven by the invisible hands of hedge funds thousands of miles away. It sparked a mix of emotions in me, the farmer's son, whose roots are deeply entwined with those of the cocoa trees. I said to myself, this is not just data; this is about the dignity of labour, the fairness of trade, and the spirit of my community.

As an avid advocate within the cocoa sector and chocolate industry, knowing that in the world of cocoa, two prices matter, is crucial. The one on the market and the one at the farm gate. But while traders in London and New York watch numbers climb (behind a computer with absolutely no idea how a cocopod looks like), farmers in Ghana see little change. Off course it’s easy to throw a jab that the farmer needs to get a grip and allow those each profession to make money while they can or better still learn high frequency trading and compete with these traders or better still break the system while they can. But how can a farmer be expected to understand the complex formulas of futures and hedges when for generations, they've been purposefully kept at arm's length from the very market they supply? As a son of Ghana, a cocoa professional and a degree in globalisation trade and industry, I've seen first-hand and understood the disconnect, the gap between the tree and the trade.

In this blog, I unpick the complexity of the cocoa market, highlighting the disparity between the futures market and the farmgate prices, the real-world impact of speculative trading, and the often-invisible struggle of farmers in Ghana. We will also investigate what hedge funds are, why their influence is problematic for smallholders like my family, and why we must challenge the normalisation of such distant and detached profiteering.

Simplified explanation of cocoa futures and the market

Cocoa futures are akin to promises made today for transactions that will occur in the future. Traders use these financial instruments to guard against the volatility of cocoa prices. But what does this mean for the cocoa farmer? Imagine promising to sell the fruits of your harvest at a price set in the present, only to watch as the market value soars or plummets in the future. You are bound to a contract, powerless to capitalise on favourable market trends or protect yourself from downturns. This is the everyday gamble of the cocoa market—a complex array of predictions and promises that often overlooks the actual producers.