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Commodity Briefing August 2011 F A IRTR A D E AN D CoCo A

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Page 1: Fairtrade and cocoa · 2015-05-28 · Fairtrade and cocoa 5 18 The volume of grindings (the industry term for processing cocoa beans into cocoa liquor, cocoa butter and cocoa powder)

Commodity BriefingAugust 2011

FAIRTRADE AND CoCoA

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2Fairtrade and cocoa

Around 50 million people globally depend on cocoa for their livelihoods. This briefing offers an overview of the industry, explores why Fairtrade is needed, and describes what it can achieve. We hope that this will provide a useful resource for all those involved with, or interested in, Fairtrade, whether from a commercial, campaigning or academic perspective.

FAIRTRADE AND Cocoa

Fast facts: the cocoa lowdown

• Around3.5milliontonnesofcocoabeansareproducedeachyear1

• Demandisexpectedtoexceed4.5milliontonnesby2020

• Withdemandforecasttooutstripsupply,thechocolateindustrycouldbeheading towards a crisis

• Closeto50millionpeoplearedependentoncocoafortheirlivelihood.2

• Côted’IvoireandGhanadominateworldproduction

• Over90percentoftheworld’scocoaisgrownon5.5millionsmallfarms3

• Afurther14millionruralworkersdirectlydependoncocoafortheirlivelihoods4

• Manycocoafarmersandworkersareamongthe2.1billionpeoplelivingon$2aday

• The2009/10cocoacrophasanestimatedexportvalueof$10bn5

• Theglobalchocolateconfectionerymarketwaswortharound$79.4bnin20106

• TheUKchocolateconfectionerymarketwasworth$5.2bn(£3.2bn)in20107

• Worldcocoaprocessingandchocolateproductionandsalesaredominatedbytencompanies

• Cocoagrowerscurrentlyreceivearound6percentofthepriceofchocolatepaidbyconsumersinrichcountries,comparedwitharound16percentinthelate1980s

• UKsalesofFairtradechocolateconfectionerygrewfrom£18min2005to£343min2010

• Around122,000farmersfrom62producerorganisationsin18countriesbenefitfromsupplyingFairtrade cocoa

iNTRODUCTION

1 Average annual production 2004/05 to 2009/10, World Cocoa Foundation, Cocoa market update, May 2010, p.22 World Cocoa Foundation, Cocoa market update, May 2010, p.13 World Cocoa Foundation, Cocoa market update, May 2010, p.14 Tropical Commodity Coalition, Cocoa barometer 2010, p.35 UNCTAD Press Release, New International Cocoa Agreement Concluded, 25 June 2010 (includes cocoa beans, cocoa butter/powder)6 Extrapolated from: The global chocolate confectionery market is estimated to be worth $88.3bn 7 The Grocer, Top Product Survey 2010, 18 December 2010in 2014, growing at 2.7 per cent CAGR (2010-14), Business Insights report,

www.foodnavigator.com, 18 May 2011

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3Fairtrade and cocoa

Main producing countriesGlobalcocoaproductionaverages3.5milliontonnesayearandisdominatedbyWestAfricanproducersCôted’Ivoire(IvoryCoast)whichproducesaround1.4milliontonnesayearandGhana(730,000tonnes).TogetherwithIndonesia(500,000tonnes),thesethreecountriesaccountfor73percentoftheworld’soutput.Around70percentofcocoacomesfromAfrica.8

Cocoademandhasbeenincreasingbyanaverageof3percentayearforthepast100years.Productionisprojectedtoriseby6percentbetween2009and20139to3.98milliontonnes.Butindustryrepresentativesestimatethatthesectorwillneedanannualproductionofatleast4.5milliontonnesofcocoaby2020tosatisfythegrowingdemand,10drivenbyrisingincomesinemergingeconomies.

Main importing/consuming countries

TheNetherlandsistheworld’slargestimporterofcocoabeans,tothevalueof$2.07bnin2009.ItisfollowedbytheUnitedStates($1.18bn),Germany($980m),andMalaysia($768m),withtheUK($422m)inseventh.12

In2009,theUKwastheworld’slargestimporterofretailchocolate,withanimportvalueof$1.29bn,closelyfollowedbyFrance($1.17bn)andGermany($1.16bn).13

Côte d’Ivoire41%

Ghana18%

Indonesia14%

Others9%

Nigeria 6%

Cameroon 5%

Brazil 4%

Ecuador 3%

Figure 1: Largest producers of cocoa

as % of world total, 2005-0911

8 World Cocoa Foundation, Cocoa market update, May 2010, pp.1-29 ‘Cocoa facts & figures’, www.worldcocoafoundation.org; World Cocoa Foundation, Cocoa market update, May 2010, p.210 Armajaro ‘Cocoa Production Outlook in 2020’, World Cocoa Foundation Partner Meeting, October 201011 World Cocoa Foundation, Cocoa market update, May 2010, p.212 World Cocoa Foundation, Cocoa market update, May 2010, p.313 World Cocoa Foundation, Cocoa market update, May 2010, p.314 World Cocoa Foundation, Cocoa market update, May 2010, p.3

Netherland$2,069m

United States$1,179m

Germany$980m

Malaysia$768m

France $493m

Belgium $467m

United Kingdom $422m

Spain $245m

Singapore $209m

Italy $209m

Figure 2: Largest importers of cocoa

beans by value, 200914

1. COCOA: GROWERS AND buyers

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4Fairtrade and cocoa

From bean to bar

A brief history of cocoa

ThoughttohaveoriginatedintheAmazonbasin,cocoawasintroducedintoEuropeinthefifteenthcentury.InthelatenineteenthcenturytheSwissdevelopedmilkchocolateandthechocolatebar,andcocoaproductionspreadtoWestAfrica.Around30countriesnowproduce3.5milliontonnesofcocoaayearinaworldmarketworth$10bn.15

How cocoa is grown

Thecocoatreeisatropicalplantgrowninhot,rainyclimatesmainly20degreesnorthandsouthoftheequator.Thetree’sfruitpodscontain30-40seedswhichareextracted–usuallybymachete–beforebeingfermentedanddriedinthesun,sobecomingcocoabeans.Cocoaisadelicatecropaffectedbybadweatherwhilediseasecausescroplossesofupto30percentofworldproduction.16Acocoatreetakesaroundfiveyearstoproduceitsfirstbeansandreachespeakproductioninaround10years.Itwilltypicallyproducealargenumberofpodsforafurther12years.17

Making chocolate

Severalstepsofprocessing(knownasgrinding)arerequiredbeforecocoacanbemadeintochocolate.Oncethebeanshavebeenroastedandshelled,thenibisgroundintoapasteknownascocoaliquorwhichisthenpressedtoextractthecocoabutter.Thisalsoleavesamassknownascocoacakewhichisgroundintofinecocoapowdermainlyusedinthebakingandconfectioneryindustries.

Cocoaliquorandcocoabutterareblendedwithingredientssuchasmilkandsugarandprocessedintoliquidchocolateforthebakingandconfectioneryindustriesorconvertedintobarsfortheconsumermarket.Cocoabutterisalsousedbyasaningredientinbeautyproductslikesoapsandmoisturisingcreams.

15 UNCTAD Press Release, New International Cocoa Agreement Concluded,25 June 2010 (includes cocoa beans, cocoa butter/powder) 16 Cocoa’, www.unctad.org/infocomm17 ‘Growing the cocoa bean’, www.worldcocoafoundation.org

3. CHALLENGes for CocoA: an industry under pressure

Figure 3: The Cocoa Market 1994 – 2011: Comparison of Fairtrade & New York Prices

NB

From1Jan2011: FairtradePrice=FairtradeMinimumPriceof$2000/tonne +$200/tonneFairtradePremium

WhentheNewYorkpriceis$2000orabove,thentheFairtradePrice=NewYorkprice+$200premium TheNewYorkpriceisthe dailysettlementpriceofthe2ndpositionCocoaFuturescontract atICEFuturesU.S.

Cocoahashistoricallybeenahighlyvolatilecommodity,whichhassignificantconsequencesforthosewhodependonitfortheirlivelihood.Seefigure3below:

0

500

1000

1500

2000

2500

3000

3500

4000

US$

per

tonn

e

The Cocoa Market 1994 – 2011: Comparison of Fairtrade & New York Prices

Feb 1994 Aug 2011 Dec 1997

New York

Fairtrade

NB From 1 Jan 2011, Fairtrade Price = Fairtrade Minimum Price of $2000/tonne + $200/tonne Fairtrade Premium (revised from $1600/tonne + $150/tonne) When the New York price is $2000 or above, then the Fairtrade Price = New York price + $200 premium                             The  New  York  price  is  the  daily  settlement  price  of  the  2nd  position  Cocoa  Futures  contract  at  ICE  Futures  U.S.                                                                                                                                                                                                                                                                                                

May 2004Nov 2000 June 2006

©Fairtrad

e Foundation

Feb1994 Dec1997 Nov2000 May2004 June2006 Aug2011

March 2011 32 yr high $3,775

Oct 2002 16 yr high $2,335

Nov 2000 27 yr low $714

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5Fairtrade and cocoa

18 The volume of grindings (the industry term for processing cocoa beans into cocoa liquor, cocoa butter and cocoa powder) is equivalent to demand

19 Extrapolated from: The global chocolate confectionery market is estimated to be worth $88.3bn in 2014, growing at 2.7 per cent CAGR (2010-14), Business Insights report, www.foodnavigator.com, 18 May 2011

20 It is impossible to be precise given that many companies do not break down their profits by business segment. Barry Callebaut made a net profit of CHF209.1 million (£121 million) in 2007/08 from chocolate sales, ‘Barry Callebaut reports full year results for fiscal year 2007/08’, www.barry-callebaut.com; ADM made an operating profit of $423 million (£256 million) in 2008 (year ending 30 June) from its ‘other’ business segment that includes its cocoa activities, ‘ADM company reports annual results’, 4 August 2009, www.adm.com; Cadbury Schweppes reported pre-tax profits of £559 million in 2008, much of which derive from chocolate sales which provide 55 per cent of company revenues, ‘2008 performance’, www.cadbury.com; Hershey reported a net income of $311 million (£188 million) in 2008, ‘2008 Annual report to shareholders’, www.hersheycompany.com

Why is the international price of cocoa so unstable?

Cocoapricesarevolatileandinfluencedbyawiderangeoffactors.Theyreacheda27-yearlow($714/tonne)atNewYorkinNovember2000anda32-yearhigh($3,775/tonne)inMarch2011.

Currenthighpricesarestronglyaffectedby:• productiondeficitsinthreeofthelastfourseasons(2006/07,2007/08,2009/10)

• disruptionofcocoaexportsfollowingthedisputedpresidentialelectioninCôted’Ivoire,November2010.

Longer-termpricetrendsareaffectedby:•changesinsupplyanddemand• theratiobetweenstocksandgrindings18

(afallingstocks-to-grindingsratiopushespricesupandviceversa)

• corporateacquisitionanddisinvestmentinthecocoatradeandprocessingindustry.

Shorter-terminfluencesonpricesinclude:• favourableweatherconditions(goodcrop, fallinprices)

• periodsofextremewetordryweather,cropdisease,pestinfestationorpoorcropmaintenance(poorcrop,increaseinprices)

• costandavailability/lackofpesticides andfertilisers

• producerswithholdingstocksintheexpectationofhigherprices

• politicalinstabilityinproducingcountries•speculativetradingonfuturesmarkets.

Astheworld’slargestcocoaproducer,Côted’Ivoire’sweatherpatternsandvolatilepoliticscanhaveahugeimpactontheworldcocoaindustry.Favourableweatherconditionsin2000contributedtoplentifulsuppliesandhighglobal

stockswhichsawpricesslumptoa27-yearlowof$714atonne.Twoyearslater,afailedcouptooustPresidentLaurenGbagboledtocivilwar.

Theresultingconcernsaboutdisruptiontococoasuppliessawpricesclimbtoa16-yearhighof$2,335.In2010,Gbagbo’srefusaltorelinquishpowertorivalAlassaneOuattarafollowingthedisputedNovemberelectionpushedthecountryonceagainintoacivilwarthatkilledthousandsandlefttheeconomyinruins.Concernsaboutsupplieswereexacerbatedbyabanonexportsthatsawnearlyhalfamilliontonnesofcocoaheldupatthecountry’sports.Thispushedcocoapricestoa32-yearhighof$3,775atonnebeforeGbagbo’sarrestendedtheconflictinApril2011.WithexportsbackontrackandevidenceofabumperWestAfricancrop,pricesfellsharplyto$3,000byAugust,a20%drop.

Value capture: who gets what?

Theglobalchocolateconfectionerymarketwaswortharound$79.4bnin2010.19Worldcocoaandchocolateprocessing(grinding)anddistributioniscontrolledbyahandfulofmultinationalcompanies.Itisestimatedthatin2008,justfourofthem–BarryCallebaut,ADM,Cadbury,andHershey–madecombinedprofitsfromcocoaandchocolateofaround£1bn.20

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6Fairtrade and cocoa

Futures markets and speculative trading

Likeothercommodities,cocoacanbetradedintwoways:eitherphysicallyboughtorsoldonthespotmarket,ortradedonthefuturesmarketsinLondon(Liffe)andNewYork(ICE).

Thetradingoffuturescontracts–acommitmenttobuyorsellastandardisedquantityofcocoabeansataspecifiedplaceandtimeinthefuture–isatoolusedbycommercialtradersandproducersto‘hedge’orprotectagainsttheriskoflossthroughfuturepricefluctuations.Futuresmarketsarealsousedbycorporatespeculators(hedgefunds)andprivateindividualstogambleonthepriceofcocoa.AccordingtotheWorldCocoaFoundation,cocoafuturespricesarehighlyinfluencedbyhedgefundmanagersandspeculators,whoseactivitiesserveasadrivingforcebehindshort-termvolatility.21

AtthebeginningofJuly2010,16oftheworld’sbiggestcocoaprocessorscomplainedthatspeculatorswereunderminingtheintegrityofLiffeanddemandedgreatertransparencyoverpositionstakenbytraders.Twoweekslater,itemergedthatthehedgefundarmofBritishcommoditiesfirmArmajarohadbought241,000tonnesofcocoa–about7percentoftheworld’stotalcocoasupply–for$920m(£648m).WithpricesatLiffehitting33-yearhighsamidconcernsaboutwetweatherandinstabilityaffectingproductioninCôted’Ivoire,Armajarowasbettingthatsupplieswouldfallandthesteepriseinpriceswouldcontinue.

Thisspectacularmoveintensifiedconcernsoverhowfinancialbuyersareseizingcontrolofsoftcommoditymarkets,sparkingvolatilityandmakingithardforsmallfarmerstoplanandinvestintheirbusinesses.Infact,inthemonthsimmediatelyfollowingArmajaro’sacquisition,goodweatherboostedproductioninCôted’IvoireandpricesfellbutArmajaroissaidtohaveavoidedlargelossesonthisbetasithadhedgeditspositiononfuturesmarkets.

Aswellashedgefundsandspeculators,investmentfunds[e.g.pensionfunds]areincreasinglybuyingintocommoditiesbecauseofmuchbetterreturnsthanequities.22ArecentreportfromChristianAid23implicatesthisactivityasafactorinthevolatilityofcommoditypricesandrecordhighfoodpricesofJanuary2010whichareputtingstapleslikemaize,riceandwheatbeyondthemeansoftheworld’spoorestpeopleandsignificantlyincreasingpoliticalunrest–reminiscentofthesoaringpricesin2008thatsparkedfoodriotsacrossmorethan30countries.

21 World Cocoa Foundation, Cocoa market update, May 2010, p.522 Wall Street Journal, 7 June 2011 23 Christian Aid, Hungry for justice: fighting starvation in an age of plenty, May 201124 Daniel Sellen, World Bank, Abidjan The Ivorian Cocoa Sector: recent developments, 200825 Agritrade, Executive brief: Cocoa, May 2008, p.5. A figure of 5 per cent is cited in a study from chocolate sales in France in 2002. In an analysis

by Christopher Gilbert (‘Value chain analysis and market power in commodity processing with application to the cocoa and coffee sectors’, Commodity market review, 2007-2008, FAO, pp.8, 23) 3.5 per cent is cited as the proportion accruing to producers of UK milk chocolate retail prices in 2004, but the average producer price share for UK chocolate for 1996-2005 was 5.7 per cent in Côte d’Ivoire and 6.4 per cent in Ghana.

Meanwhilefarmersonthegroundreceiveameagreportionoftheinternationalpriceofcocoa–around36percentinCôted’Ivoirein2008,withgovernmenttaxesaccountingforahuge35percent.24

WestAfricansupplychains,Figure4onpage7,showthatproducersselltheirdriedbeanstolocaltraderswhosellthemontoexporters,oftenforeign-ownedcompanies.Mostofthemoneyfromthecocoatradeismadeafterthebeans

havebeenprocessed,notablyfromthemanufactureofchocolate.Growersin WestAfrica–manyofwhomhavenevertastedchocolate–arelikelytoreceivejust3.5to 6.4percentofthefinalvalueofachocolatebar,dependingonthepercentageofcocoacontent.Thisiscomparedwith16percentinthelate1980s.Bycontrast,themanufacturers’sharehasincreasedfrom56to70percent,andforretailersfrom12to17percent,overthesameperiod.25

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7Fairtrade and cocoa

26 The material on p.6 is adapted by the publisher from Towards a Sustainable Cocoa Chain,2009, with the permission of Oxfam GB, Oxfam House, John Smith Drive, Cowley, Oxford OX4 2JY UK, www.oxfam.org.uk. Oxfam GB does not necessarily endorse any text or activities that accompany the materials, nor has it approved the adapted text.

27 World Cocoa Foundation, Cocoa market update, May 2010, p.328 Oxfam, Towards a sustainable cocoa chain: Power and possibilities within the cocoa and chocolate sector, 2009, p.1429 Agritrade, Executive brief: The Cocoa sector in ACP-EU Trade, October 2009, p.6

Figure 4: West African cocoa supply chains26

Ghana

Licensed Buying Companies

Cocobod (industry regulator)

Based on Towards a Sustainable Cocoa Chain, Figure 4, p.17, Oxfam International Research Report, January 2009

Cocoa farmers Co-operatives

Côte d'Ivoire

Local Traders

Cocoa Farmers Co-operatives

Local Grinders Local Market Local Grinders* Local Market

*Local grinding in Ghana is very limited. **These companies are not just involved in the grinding stage of the supply chain: Barry Callebaut, Cargill and ADM sell small amounts of individual chocolate; Blommer and Barry Callebaut manufacture chocolate for consumers. ***Some chocolate companies also have their own grinding capacity, but this is limited.

Distributors Retailers Caterers Specialised Markets

Exporters & International Traders of cocoa beans, semi-processed products

Grinders: processing cocoa into cocoa powder, cocoa butter and industrial

chocolate** Barry Callebaut, Cargill, ADM, Petra

Foods, Blommer & others

Chocolate Companies: manufacturing chocolate

for consumers***

Nestlé, Cadbury Schweppes, Cémoi, Ferrero, Kraft Foods, Mars,

Hershey & others

Consumers

Cocoabeansareprocessedintosemi-finishedproductssuchascocoaliquor,cocoabutterandcocoapowder.Africancountriesproduce70percentoftheworld’scocoa.Butonly18percentofitisthenprocessedinAfricacomparedtoEuropewhichprocesses41percent.27Justthreecompanies–Cargill,ADM,andBarryCallebaut–grind40percentoftheworld’scocoa,amountingtonearly1.5milliontonnesayear.28

Amsterdamishometomanyoftheirmajorprocessinginstallations,whichexplainsthelargevolumesofcocoabeansimportedbythe

Netherlands.TheNetherlandsisalsotheworld’sleadingcocoagrinderandlargestexporterofcocoapaste(24%ofthetotal),cocoapowder(28%)andcocoabutter(30%).29RelativenewcomerOlam,basedinSingapore,isnowoneofthetopfourcocoagrinders.

Encouragedbygovernmenttaxbreaks,foreign-ownedcompaniesincludingCargill,ADM,BarryCallebautandOlamareinvestingheavilyincocoaprocessingfacilitiesinCôted’Ivoiretoreducecostsandensuretheyhave

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8Fairtrade and cocoa

consistentsuppliesofcocoa.Withgrindingcapacitynowexceeding500,000tonnes,Côted’IvoireispoisedtoovertaketheNetherlandsastheworld’slargestcocoagrinder.30

Chocolatemanufacturersprocesscocoaliquor,cocoabutterandcocoapowdertoproducearangeofcocoaandliquidchocolateproductsforthebaking,confectioneryandspecialitychocolateindustriesaswellasblockchocolateforprivatebrandsandsupermarketown-labelproducts.Switzerland-basedBarryCallebautmakeschocolateforgroupssuchasNestlé,KraftandHersheyanddominatesworldproduction–preciseandcurrentdataishardtoobtainbutin2003,itcontrolled51percentofthemarket.31Thesecondandthirdlargestcompanies–US-basedADMandBlommer–controlledafurther20percent.32

Globalretailsalesaredominatedbyfivecompanies–Mars,Nestlé,Hershey,Kraft/Cadbury,andFerrero.Combined,thesecompaniesaccountfor57percentofchocolatesales.33Cadbury,MarsandNestléchocolatebrandsdominatetheUKmarketwhileHershey,MarsandNestlécontrol80percentofUSsales.34 ThelastdecadehasseenatrendforthesemajorbrandstophaseoutcocoaprocessingandsubcontractmanufacturetoprocessorslikeBarryCallebautandADMwho,inturn,areexpandingtheirproductioncapacityinEurope,theUSandMexicoandinproducercountriessuchasCôted’Ivoire,MalaysiaandMexico.

Child labour in cocoa production

In2004,theUSDepartmentofStateestimatedthat109,000childreninCôted’Ivoire’scocoaindustryworkedunder‘theworstformsofchildlabour’36,mainlyonfamilyfarms,andthatupto10,000werevictimsofhumantraffickingorenslavement.37Despiteimprovements,arecentreportsaysboysfromGhana,MaliandBurkinaFasocontinuetobetraffickedforforcedlabouronagriculturalplantationsincludingcocoafarms.38Childlabourremainswidespreadinthecocoasectorwithaquarterofchildrenagedbetween5and17livingincocoa-growingregionsinvolvedinitsproduction,mainlyonfamilyfarmsorworkingwithparents.Mostofthesechildrenareexposedtohazardousconditionssuchasusingdangeroustools(94percent)andcarryingheavyloads(80percent)with51percentreportinginjurieswhileatwork.39The2001Harkin-Engelprotocol–acommitmentbythecocoaandchocolateindustrytopromotevoluntarystandardstohelpeliminatechildlabour–hasplayedsomeroleindrivingmoreengagementwiththisissuebuthasclearlybeeninsufficientintransformingtheoverallpicture.

How Fairtrade is tackling child labour

Amajorcauseoftheuseofchildlabouris poverty:farmersreceivesuchlowpricesfortheirproducethattheycan’taffordtopayhiredworkers.Evenwherefarmerswanttheirchildrentoattendschool,thisisoftenhamperedbypooravailabilityofeducationinruralareas,andparentsnotbeingabletoaffordtobuyschoolbooksorpayteachers.

Itisnaturalforchildrentocontributetothehouseholdincomebyhelpingoutonthefamilyfarminappropriateworkthatdoesn’tjeopardisetheirhealthoreducation.ButFairtradestandardsprohibitchildrenfrombeingemployedinillegalorharmfulwork.RegularauditsaredesignedtodetectinstancesofchildlabourandmajorbreachesofFairtradestandardsontheworstformsofchildlabourcanresultinsuspensionoftheproducergroupalongwithcorrectiveactionstobetakentoaddresstheproblem.Theaimof

United Kingdom$1,286m

France$1,168m

Germany$1,159m

UnitedStates$879m

Netherlands$640m

Others$2,186m

Figure 5: Top five importers of retail chocolate by value, 200935

30 Reuters, www.flex-news-food.com, 17 August 2010 31 Agritrade, Executive brief: Cocoa, May 2008, p.532 ‘Cocoa’, www.unctad.org/infocomm33 Oxfam, Towards a sustainable cocoa chain: Power and possibilities within the cocoa and chocolate sector, 2009, p.15. Cadbury was

subsequently taken over by Kraft Foods in an £11.5bn deal on 2 February 201034 Oxfam, Towards a sustainable cocoa chain: Power and possibilities within the cocoa and chocolate sector, 2009, p.1835 World Cocoa Foundation, Cocoa market update, May 2010, p.336 The Worst Forms of Child Labour as defined in ILO Convention 182 of 1999 include: all forms of slavery, the sale and trafficking of children, debt

bondage, forced labour, forced recruitment of children for use in armed conflict, the use of children for prostitution, pornography, and trafficking drugs, and work which is likely to harm the health, safety or morals of children.

37 US Department of State, Country reports on human rights practices: Côte D’Ivoire, 24 February 2004, www.state.gov38 US Department of State, Trafficking in Persons Report, June 2010, www.state.gov39 US Department of State, Country reports on human rights practices: Côte D’Ivoire, 8 April 2011, www.state.gov

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9Fairtrade and cocoa

thisprocessistoprovidetrainingandsupporttotheproducerorganisationinsolvingtheproblem,ratherthanimposingharshpunitivemeasuresthatcouldhavetheeffectofpushingfarmersdeeperintopovertyandputtingevenmorechildrenatrisk.MostimportantlyFairtradehelpsaddresstherootsofchildlabourbyempoweringandstrengtheningthepositionoffarmersininternationalsupplychains,helpingthemtobecomeorganisedwithintheircommunities,aswellasenablingthemtoearnabetterdealfromthesaleoftheirproduce.

Manyproducersareactivelytacklingchildlabouranditscauses.KuapaKokoo,aFairtradecertifiedco-operativeinGhana,hassetupawide-rangingChildLabourProgramme.Part-paidbytheFairtradepremium,itincludesataskforcetocarryoutinternalchecksonfarmsandtrainmemberstoidentifychildrenatrisk,aswellasorganisingKids’Campstoteachchildrenabouttheirrights.AndinJanuary2011,theco-operativelaunchedatwo-yearjointprogrammewiththeInternationalLabourOrganization(ILO)tomonitorandcombat childlabour.

Similarly,theKavokivaco-operativeinCôted’Ivoire,alsoFairtradecertified,hasbeenfightingchildlabourformanyyears.FormalisedbyitsChildLabourCharterin2008,programmestosupporttheeducationofchildrenhavebeensupplementedwithestablishingtaskforcestotrainmemberstoidentifychildlabourandtakeappropriateaction.

MoreinformationonhowFairtradeisrespondingtothisissuecanbefoundinaPositionPaperonChildLabourandaFactsheetonChildLabouravailableintheResourcessectionoftheFairtradeInternationalwebsiteatwww.fairtrade.net/info_sheets.html.

3. THis Is why fAirtradE iS neEdeD

Witharound70percentoftheworld’scocoabeinggrowninWestAfrica,particularlyCôted’IvoireandGhana,cocoagrowersaretypicallysubsistencefarmersonaverylowincome.Theygrowstaplefoodssuchasyam,plantainsandcassavaandperhapssellsmallamountsoffruitorvegetablestothelocalmarket.Cocoaisgrownalongsidethesefoodcropsandprovides

themaincashincomethatfarmersrelyontopayschoolfees,medicalbillsandpurchaseothernecessitiesfortheaveragehouseholdofsixpeople.Withonemainharvestayear,farmershavetobudgetcarefullythroughouttherestoftheyearandoftenneedtotakeoutexpensiveloans.Itisimpossibletosavemoneyandbythetimethenextharvestbeginsfarmersaredesperatetoselltheirbeanstogetcash.

Inadequate infrastructure

Asaresultofthelackofgovernmentinvestmentininfrastructure,villagesincocoagrowingareastypicallyhavepooreducationandhealthcareservicesandlackelectricityanddecentsanitation,withwateronlyavailablefromcommunalwells.Accessisviapoorlymaintainedroads,oftenimpassableinthewetseason,withvillagesinGhanatypically10kmfromthenearestpavedroad.Thisisincreasedto15kminCôted’Ivoire,wheretheclosesthospitalcanbeupto35kmaway.

Poor education

IlliteracyratesamongfarmersincocoagrowingcommunitiesofCôted’Ivoirecanbeashighas95percent.Schoolattendanceislow–becauseschoolsaresimplytoofaraway,orbecauseparentscan’taffordschoolfees,booksandothercosts–andisamajorfactorbehindchildlabouroncocoafarms.

Food insecurity

Farmersnowalsofacehigherfoodcostsandincreasingly,foodinsecurity.Therecordhighpricesfollowingthe2008globalfinancialcrisisweretoppedinFebruary2011whenagriculturalproductionwasdisruptedbysevereweather.40Itishardtoforeseeasignificantfallinfoodpricesinthenearfuture.

Lack of technical support

Governmentsinproducingcountrieslevyhighexporttaxesoncocoabeans41toboostnationaleconomiesattheexpenseoffarmerincomes.Buttoolittlehasbeenre-investedinsupportingfarmersbyprovidingtechnicaltrainingtoimproveyields,developco-operatives,buildbusinesscapacityorimprovemarketaccess. InGhanaandCôted’Ivoirefarmersharvestanaverageof300kg–400kgofcocoabeansperhectareperyear–upto50percentlowerthantheirpotentialproductivity.42Thisisduetooutdatedfarmingmethods,thelackof

40 FAO Initiative on Soaring Food Prices http://www.fao.org/isfp/isfp-home/en/ accessed May 201141 Oxfam, Towards a sustainable cocoa chain: Power and possibilities within the cocoa and chocolate sector, 2009, p.1342 Oxfam, Towards a sustainable cocoa chain: Power and possibilities within the cocoa and chocolate sector, 2009, p.6

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10Fairtrade and cocoa

accesstotechnologyandfinanceand lackofincentivestoimprovedepletedsoilfertilityorreplaceageingtrees,manyofthemmorethan25yearsoldandpastpeakproductivity.

Rising farm costs

Accesstocreditislimitedbutthepriceoffertilisersandpesticidestocombatpestsanddiseasecontinuestoriseasdofuelandtransportcosts,whilelackoftrainingsupportandpoorfermentinganddryingtechniquesreducethequalityofthecrop.

Climate change

Ontopofallthis,climatechangeprovidestheadditionalthreatofcropfailureasaresultofunpredictablerainpatternsandmorefrequentandlongerdryperiodswhich,inturn,arepredictedtoincreasethenumberandspread ofpestsanddiseases.

Poor market information

Small-scalecocoafarmerstendtohavea lackofunderstandingaboutqualityrequirementsandlackinformationaboutlocalpricechangesandarefrequentlypaidlessthanmarketpricesbymiddlemen.Manyfarmerscomplainthatprivatetradersoftenusedistortedscalestofalselyweighfarmers’produceandunderpaythemfortheircrop.

Falling incomes in real terms

Inrealterms–adjustedforinflation–the pricefarmersreceivefortheircrophasfallenvirtuallyeveryyearsincethelate1970s. Thishasrestrainedeconomicdevelopment andexacerbatedpovertyinvulnerablecommunities.Atthesametime,profitsmade byglobalfoodgiantshavesteadilygrown.Itisonlyinthepastfewyears–amidrealindustryconcernsofastructuraldeficitincocoaproduction–thatthisdownwardtrendhasbeguntobereversed.Wheninternational cocoapricesrise,farmerstendtobenefitbut nottotheextentthattheyareautomaticallyguaranteedadecent,sustainableincome.

Theconsequenceofdecadesofuncertainorlowpricesisthatfarmershaveneithertheincentivenorresourcestoinvestinreplantingorpurchasingexpensiveinputsnecessarytoproduceahighqualitycrop.Youngergenerationswhoseenofutureincocoaareswitchingtomoreprofitablerubberproductionorheadingforthecitiesinthehopeoffindingamoredependablelivelihood,butoftenending upwithanequallyuncertainexistenceonthestreets.Asaresult,theaverageageofcocoafarmersinWestAfricaisnow5143,leadingtoseriousconcernsacrosstheindustryaboutthelong-termsustainabilityofthesupplychain:nococoafarmers=nochocolatebars.

This is how Fairtrade works for cocoa growers...

Fairtradeaimstosupportthedevelopmentofasustainablecocoasectorwherefarmersareabletobuildbetterlivelihoodsforthemselves,theirfamiliesandcommunitiesthroughareliableandsustainablecocoasupplyandmutuallybeneficiallong-termtradingrelationships.

Fairtradecertificationforcocoaproducersisopenonlytosmallfarmerorganisationswhichareownedandgovernedbythefarmersthemselvesandhaveademocraticdecision-makingstructureandtransparentadministrationinplace.

Fairtradestandardsencouragethesocial,economicalandenvironmentaldevelopmentof

Figure 6: Cocoa prices in real terms

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43 Binam, J. N., Gockowski, J. and Nkamleu, G. B. (2008), Technical Efficiency and Productivity Potential of Cocoa Farmers in West African Countries. The Developing Economies, XLVI-3 (September 2008): p. 254

Source:InternationalCocoaOrganization(ICCO)

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11Fairtrade and cocoa

producersandtheirorganisations.Thestandardsactasasafetynetforsmallfarmersagainsttheunpredictablemarket,ensuringtheygetapricethatcoverstheiraveragecostsofproduction.

KeyprovisionsandobjectivesofFairtradestandards:• Aminimumpriceof$2,000/tonneforFairtradecertifiedcocoabeans,orthemarketpriceifhigher

• AnadditionalFairtradepremiumof$200/tonneforinvestmentincommunity,businessandenvironmentalprojects

• Anextra$300/tonneforFairtradecertifiedorganiccocoabeans

• Producerorganisationscanrequestpre-finance(credit)ofupto60percentofthepurchaseprice

• Promotionoflong-termtradingpartnershipsandequitablebusinessrelationshipsinthetradingprocess

• Environmentalstandardspromotesoundagriculturalpracticesandenvironmentalstewardshipfocusingonminimisedandsafeuseofagrochemicals,properandsafemanagementofwaste,maintenanceofsoilfertilityandwaterresources,nouseofgeneticallymodifiedorganisms

• Forcedlabourandchildlabourareprohibited.

Thevolatilityofcocoapricesonworldmarketsmakesithardforfarmerstopredicttheirincome,planproductionandmakelong-terminvestmentdecisions.Butonethingisclear:throughpeaksandtroughs,Fairtradedeliversforcocoaproducers,givingthemasustainablepriceandadditionalpremiumtoinvestincommunity,socialandeconomicprojects.

Is Fairtrade cocoa changing the mainstream market?

Consumer pressure

Inrecentyears,effectivecampaignstrategieshaveexposedproblemsinsupplychainsindevelopingcountries,highlightingissuesfromworkers’rights,childlabourandclimatechangetotheimpactofproductiononlocalcommunitiesandtheenvironment.

Arecentsurvey44foundthatUKconsumerscontinuetohavehighexpectationsofhowcompaniesoperateindevelopingcountries:over80percentsaidcompaniesshouldprotecttheenvironmentandensurefarmersandworkersarepaidfairlyandhavesafeworkingconditions.

Consumers,then,areincreasinglyawareoftheimpactoftheirpurchasesandwanttobereassuredthatproductsareethicallyandresponsiblyproduced.

Fairtrade certification is unique

Tomakeappropriatepurchases,consumersmustnegotiateamazeofbrandclaims,industryinitiativesandcertificationschemesandassesstheirmerits.

Whileseveralschemesaimtoprotecttheenvironmentordevelopproducttraceability,Fairtradeistheonlycertificationschemewhoseprimarypurposeistotacklepovertyandempowerproducersindevelopingcountries. Aninternationallyaccredited(ISO65)independentinspectionbodyupholdsFairtradestandardsandunderpinstheintegrityofthecertificationsystem–asendorsedbyarecentsurvey45thatfoundnineoutoftenconsumerstrustFairtrade,significantlyhigherthanforanyotherethicallabel.SopurchasingFairtradegoodsgivesconsumersapowerfulandcrediblewayofaddressingtheseconcernsandreducingpovertythroughtheireverydayshopping.

Fairtradeisalsouniqueasacertificationschemeinbeingsupportedbyawidespread,grassrootscampaign,withover500localcommunitycampaignsintheUKaloneaswellasthousandsofschools,universitiesandfaithgroupsallcampaigninglocallyinsupportofFairtrade andtheprinciplesitembodies.

Businesses respond

Smartbusinessesarerespondingtoconsumerdemandsthatcompaniestreatsuppliersfairlyandrespecttheenvironmentasawin-winscenarioinwhichdoingtherightthingenhancesbrand

44 GlobeScan June 201145 TNS March 2011

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12Fairtrade and cocoa

reputation.ThreeoutoffourUKconsumersseethird-partycertificationasthebestwaytoverifycompanies’claimsaboutsocialsustainability.Andwiththree-quartersofconsumersalsosayingtheFAIRTRADEMarkonproductshadapositiveimpactonbrandperceptions,theindependentscrutinyoftheMarkcanplayanimportantroleforbusinessesinmanagingthereputationoftheirbrandswithconsumersanddemonstratingtheirsustainabilitycredentialstomedia,investors,suppliersandgovernments.

Chocolateconfectionerycompaniesacrosstheworldareconcernedaboutthesecurityoffuturesuppliesandsharecommongroundwithfarmersinneedingtoimprovesustainableproductionpracticesandreducepricevolatility.Inthisenvironment,forward-lookingbusinessesunderstandtheimportanceoflong-termrelationswithproducerpartnersasameansofensuringreliablesuppliesofcocoa,andagrowingnumberofbusinessesintheUKarebenefittingfromworkingwithFairtradeandbuildingstableandsecurerelationshipswithcertifiedproducerpartners.

Developing farmer businesses

Fairtradestandardssupportthedevelopment offarmers’organisationsintowell-organisedbusinesses,accountabletotheirmembers.Economiesofscaleallowthemtoprovidefarmerswithtechnicalandmarketingservicesandimplementprogrammestoincreaseyieldand

quality,enablingthemtooffercompaniesreliable,secureandsustainablesuppliesofcocoabeans.

Independentinspectionprovidesthescrutinythatmotivatesproducerorganisationstoactivelyandeffectivelyensurecomplianceandtoprogressivelystrengthentheirorganisationsbydevelopingandadaptinginternalsystemsandprocesses.

Supporting producer organisations

Morebroadly,FairtradeisalsoinvestinginFairtradeProducerNetworksinAfrica,AsiaandLatinAmerica,andinliaisonofficerstohelpproducersgetthebestoutofthesystem,andtosharebestpracticeinfarmingtechniquesandorganisationaldevelopment.FairtradeProducerNetworksarealsodevelopingstrategicpartnershipswithfinancialinstitutions,regionaltechnicalassistanceprogrammesandgovernmentoutreachprojects.TheAfricanFairtradeCocoaNetwork,forexample,wasrecentlyestablishedtosupportpeerlearningandinformationexchangetopromotegreateraccesstomarketsandtechnicalassistance.

Healthy global sales growth

GlobalsalesofFairtradecocoagrewfrom14,000tonnesin2009to35,000tonnesin2010,up114percent,mainlyduetogrowthintheUKmarket.Fairtradeaccountsforaround0.9percentoftheworldcocoamarketandcertifiedproducerorganisationshaveanestimatedcapacityof109,000tonnes.

46 Fairtrade Labelling Organizations International (FLO) internal documents and FLO Annual Reports 2002-09

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UK chocolate sales soar

Morethan120companiesnowmarketover500Fairtradechocolateconfectioneryproducts47,drivingaten-foldgrowthinretailsalesfrom£32min2008to£343min2010.Withthetotalcategoryworth£3.2bnin201048,Fairtradesalesnowmakeuparound10percentofUKchocolateconfectionerysales.Seethefullrangeat www.fairtrade.org.uk/chocolateproducts.

Alternative trade organisations lead the way

Fairlytradedcocoaandchocolatehadbeensoldbythepioneeringalternativetradeorganisationsformanyyears.Traidcraft,setupin1979,sellsarangeofFairtradechocolatebars,andhasdevelopedsnackproductslikeGeobartobuildsalesforcocoaproducers.Cafédirect,thepioneeringcoffeecompany,alsosellshotchocolatefromfarmersintheDominicanRepublicandSãoTomé.

DivineChocolateisauniqueFairtradechocolatecompanysetupbyKuapaKokoo,aco-operativeofcocoafarmersinGhana,sothattheycouldaccessagreatershareofthevalueofthechocolatemadefromtheircocoa.Whilemostcocoafarmersdependonanincomefromsellingrawcocoa,whichisworthafractionofthevalueofchocolate,theKuapaKokoofarmersbenefitnotonlyfromtheFairtradepremiumwhentheyselltheircocoa,butalsofromtheir45percentshareofthedistributablecompanyprofitsandhavingapowerfulvoiceinthebrand’soverallstrategy.Byhavingfarmerscentraltoitsproposition,DivinehasmadeKuapaKokoofamousandcompanyownershiphasmeanttheco-operativehasbecomearealplayerintheGhanaiancocoaindustry.

Divine’ssuccessinmainstreamchannelshasbuiltconsumerdemandforFairtradechocolate

andinfluencedbigbrandsandretailerstocertifysomeoftheirproductsasFairtrade.Thenextstepistoencourageothermanufacturerstoempowerproducersbycommittingtofairtermsoftradeinthelongterm,andgivingthemashareinthewealththey’vehelpedcreate.

Own-label market opens up

TheCo-operativeswitchedallitsown-labelchocolatetoFairtradein2002andlaunchedtheUK’sfirstown-brandFairtradeproductin2005.Marks&Spencer,Sainsbury’sandWaitrosenowalsohaveextensiverangesofown-brandFairtradechocolateproducts.

Big brands come on board

InJuly2009,CadburyDairyMilkbecame100percentFairtradeintheUKandIreland,49thefirstmassmarketchocolatebartogainFairtradecertification.ThiswassubsequentlyextendedtoincludeCanada,NewZealand,Australia,andJapan–acombinedmovethatquadrupledtheamountofcocoasoldunderFairtradetermsforcocoafarmersinGhana.AndinabreakthroughforFairtradeinAfrica,top-sellingCadburyDairyMilkbarsinSouthAfricawillbeconvertedtoFairtradebytheendof2011–thefirst-everFairtradechocolatebarsourced,manufacturedandsoldentirelyinAfrica.

January2010sawNestléswitchfour-fingerbarsofKitKattoFairtrade,workingwithfarmersinCôted’Ivoire.Meanwhile,Green&Black’s–whoseMayaGoldchocolatebarwasthefirstproducttocarrytheFAIRTRADEMarkin1994–announceditwillswitchitsentirerangeofchocolatebarandbeverageproductsto100percentorganicandFairtradein30countriesbytheendof2011.ThesecommitmentswillinitiallyimprovelivelihoodsofthousandsofcocoafarmersinCôted’IvoireandDominicanRepublic.

47 This category includes chocolate bars, boxes of chocolates and Easter eggs but not composite products such as ice cream and biscuits48 The Grocer, Top Product Survey 2010, 18 December 2010 49 Fairtrade Foundation, ‘UK first as Cadbury Dairy Milk takes Fairtrade further into the mainstream’, 22 July 2009, www.fairtrade.org.uk50 Fairtrade Foundation, ‘Facts and figures on Fairtrade’, www.fairtrade.org.uk/what_is_fairtrade/facts_and_figures.aspx

Figure  8: How  UK  sales  of  Fairtrade  chocolate  confec8onery  have  grown  (£  million)

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Fairtrade benefits in Ghana

TheKuapaKokoococoaco-operativeinGhanarepresents63,000small-scalegrowersin1,400villagesocietiesandhasbeenFairtradecertifiedsince1995;itistheonlyfarmer-ownedorganisationamongtheprivatecompaniesinGhanagrantedlicencestotradecocoa–mostfarmershavetoselltheircropindividuallytolicensedbuyingcompanies.Kuapa’smembersproduced35,000tonnesofcocoain2009,ofwhich27percentwassoldasFairtrade,tobeusedinhundredsofproducts,notablyDivinechocolate.KuapaarealsonowsupplyingcocoatoCadburyaspartofthecompany’sconversionofDairyMilktoFairtrade.

MostKuapafarmersgrowcocoaalongsidefoodon3-4hectaresofland,withcocoasalesprovidingalmostalltheirincome.Fewhaveaccesstoadequatehealthcare,cleandrinkingwaterorelectricity,andchildrenaretaughtinonlybasicschools.TheextraincomefromtheFairtradepremiumhashelpedbuildhundredsofwaterboreholes,publictoilets,andtwoday-carecentresaswellashelpingtofundamobilehealthprogrammewhichvisitsthevillages.WarehousinghasbeenconstructedatTemaport,farmershavebeenpaidendofyearbonusesanddevelopmentofficershavebeenemployedtoadviseongoodagriculturalpractices,setuptrainingprogrammesinmanagementandleadershipskills,andorganiseHIV/AIDSworkshops.

AnassessmentoftheimpactofFairtradeatKuapafoundwomen’sparticipationinKuapahasbeenactivelypromoted;eachco-operativesocietyelectsaseven-strongManagementCommitteeofwhichtwomustbewomen.51Alternativeincomegeneratingschemesfortheempowermentofwomenhavebeensetup:tie-dyetextiles,soapmaking,palmnutproductionandpalmoilextraction,cornmillingandsnailfarmingforlocalandexportmarkets.

ThepremiumwasfoundtohavehadanimpactbeyondKuapamembers–over100,000peopleinthecommunityhavebenefittedfromfreemedicalattentionandprescriptionsandtheconstructionofaschoolbuilding.

Interviewsin2002withparents,childrenandteachersindicatedthattheschoolbuildingprojecthad‘emphatically’improvedschoolattendance,healthandthequalityofeducation.Anincreasedentrepreneurialspirithasalsoemergedamongstwomensupportedtoengageinincome-generatingactivities,withindicationsofincreasedwellbeingamongstwomen,despiteincreasesintheirworkload.ParticipationinKuapaKokooandtheestablishmentoftheDivinechocolatecompanyinwhichtheproducershaveasignificantownershipstakehasalsoprovidedmemberfarmerswithanincreasedsenseofcontrol.52

51 Fairtrade Foundation, ‘Kuapa Kokoo Union’, www.fairtrade.org.uk/producers/cacao/kuapa_kokoo_union.aspx52 L.Ronchi, Monitoring impact of Fairtrade initiatives: A case study of Kuapa Kokoo and the Day Chocolate Company, 2002

‘With Fairtrade income we were able to implement a fermentation programme to improve the quality of our cocoa and convert our production to certified organic. This improved our position in the export market. The Fairtrade market is a very important market for the survival of our members.’ IsidorodelaRosa,ExecutiveDirector,ConacadoCo-operative,DominicanRepublic

Fairtrade impact is growing

Therearenow62Fairtradecertifiedproducerorganisationsrepresentingmorethan120,000farmersacross18countries–Belize,Bolivia,Cameroon,Colombia,CostaRica,Côted’Ivoire,DominicanRepublic,Ecuador,Ghana,Haiti,India,Nicaragua,Panama,PapuaNewGuinea,Peru,SãoTomé,SierraLeoneandSriLanka.In2010Fairtradecocoagenerated$5.1minFairtradepremiums,mainlyinWestAfrica.

4. How Fairtrade benefits farmers and their families

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Fairtrade benefits in Côte d’Ivoire

MembershipofKavokivaco-operativehasgrowntomorethan3,400farmersintheDaloadepartmentofsoutheastCôted’Ivoire,wheremorethan40percentofthecountry’scocoaisproduced.Adecade-longperiodofpoliticalcrisis,includingcivilwar,sawpovertylevelsinthecountryclimbtonearly50percentin2008alongwithaslowdeteriorationofbasicsocialandeconomicinfrastructuresuchashealthandeducation.

ManyofthevillagesinwhichKavokivamemberslivehavenoelectricity,withdrinkingwateronlyavailablefromthevillagewell.Accesstohealthcareisinadequateandthenearestclinicorhospitalcanbemorethan10kmaway.Theilliteracyrateamongagriculturalcommunitiesisashighas95percent,withmanyschoolspoorlyequippedandtoofarawayforchildrentoattendeachday.

Fairtradecertifiedin2004andwithincreasedsalesfollowingtheconversionofNestlé’sfour-fingerKitKattoFairtrade,KavokivaisusingtheFairtradepremiumtoincreaseproductionandhelpmeetthesocialneedsofmembersandtheircommunities.

Aqualifiedagronomisthasbeenhiredtoimprovefarmingtechniquesandboostyields.Cleanwaterandhealthcarearepriorities–farmerscan’tworkontheirfarmsiftheyaresick–andthreenewwellswithpumpshavebeenconstructed.Amajorachievementhasbeentheconstructionofahealthcentrewithadoctor,midwife,andtwonurses.Anambulancehasbeenpurchasedtocollectpatientsandafreehealthinsuranceschemewithaffordablemedicinesisavailabletoallmembers.

Withaccesstoeducationaprioritybutproblematic,Kavokivadistributesscholarshipstomemberstopaytheirchildren’sschoolfees.Andwheregovernmentschoolsaretoofarforchildrentoattend,thepremiumhashelpedtobuildvillageschools,withtheirparents’feescontributingtoteachers’salaries.

Fairtrade benefits in Dominican Republic

TheDominicanRepublicisthesecondpoorestcountryintheCaribbeanafterHaiti,withforty-twopercentofitspopulationof9.6millionlivingbelowthepovertyline.Cocoaisgrownbyaround40,000small-scalecocoagrowers.Oneofthemainagriculturalexports,itiswortharound$60mayeartotheeconomy.

CONACADOismadeupof182small-scaleproducerassociationswithatotalmembershipof10,000cocoafarmers.Theaveragefarmis4.3hectares(10.6acres).Cocoaisgrownundertheshadecanopyoftallnativetreesandsmallerbanana,citrus,andavocadotreeswhosefruitissoldatthelocalmarket.Vegetablesaregrownforhomeconsumption.

Almosthalfofmembers’productionisnowsoldtotheFairtrademarket.Theadditionalincomehasbeeninvestedinprocessingandwarehousefacilitiestoimprovethequalityoftheircocoa,30extensionofficershavebeenemployedtoprovidetechnicaltrainingtoimproveyields,converttoorganicproductionandplantnewtrees.Schoolshavebeenbuiltandrepaired,withscholarshipsandequipmentprovidedtostudentsfrompoorerfamilies.ThenewITcentrehelpschildrenwithschoolworkandbringstheinternettothecommunity.Aclinic,freemedicalchecks,andcleanwaterprojectsareimprovinghealth.

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53 ICCO Press Release, Uncoordinated projects could make cocoa’s boom and bust cycle worse, the ICCO’s Executive Director says, www.icco.org, July 2011

RamigiaMoyaisa68-year-oldwidowandcocoafarmerwhosedaughterandson-in-lawhelponherfarm.Shenowhasatapoutsideherhomeprovidingpipedspringwaterforwashingandotherhouseholdchores.

MarianoManzuela,a64-year-oldcocoafarmerwithawifeand11children,isoneofthepoorestfarmersinhiscommunity.Fairtradepremiumprojectshavebenefittedhisfamilyinseveralways.Hehastakenoutaloantoextendandrepairhishouse,hischildrenhavereceivedscholarshipstopayforschoolexpensesandexamfees,andanewclassroomisbeingbuiltattheprimaryschoolhisyoungestsonattends.Fourofhischildrenarestillinschoolandhehopestheywillbeabletofinishtheireducation,unlikeoneofhisdaughterswhohadtogiveupheruniversityplaceastheexpensesweretoohigh.

ReadmoreonourCocoaProducerspagewww.fairtrade.org.uk/producers

5. Conclusion

Cocoagrowerscontinuetofacechallengesonmanyfronts:fluctuatingprices,ageingandunproductivecocoatrees,depletedsoilfertility,theuncertaintiesofclimatechange,therisingcostsoffarminputs,fuelandtransport,lackofaccesstocredit,andlackofnegotiatingpowerinthesupplychain.

Intheirdailylives,farmerscontendwithrisingfoodprices,poorlocalinfrastructure,inadequatehealthcare,limitededucationalopportunities fortheirchildrenand,insomecases,politicalinstability.

FormanyyearsUNagencytheInternationalCocoaOrganization(ICCO)hassupportedprojectstodevelopcocoaproductionandtradeandimprovetheincomesofsmallholdercocoafarmers.InJune2010,undertheauspicesoftheUnitedNationsConferenceonTradeandDevelopment(UNCTAD),majorcocoaexportingandimportingcountriessignedanewInternationalCocoaAgreementwiththeobjectiveofdevelopingasustainablecocoatradewithincreasedbenefitstoallstakeholders,inparticularforthesmallholderproducers.

Withdemandoutstrippingsupplyinthreeofthelastfouryearsandstronggrowthindemandpredictedinemergingeconomies,multinationalcompaniesthatprocess,manufactureandmarketchocolateproductsareincreasinglyconcernedaboutsecuringreliablesuppliesofgoodqualitycocoaforthefuture.Inrecentyearsmajorcompaniesandindustrybodies,backed

byproducingcountrygovernments,have setupmorethan60ongoingcocoaprojectsdesignedtoaddresstheissueofsustainabilityandimprovethelivelihoodsofcocoafarmers,largelybyfocusingontrainingfarmers toimprovequalityandincreaseproduction andproductivity.

Whiletheseinitiativesaretobewelcomed,theywillnotnecessarilyredressthelong-termtrendoflowandunstablepriceswhich,asdescribedearlier,areamajorfactorbehindthelackofinvestmentinqualitycontrolorreplacingageingtreesandtheconsequentfallorstagnationincocoaproduction.And,accordingtotheICCO53,theseuncoordinatedprojectscouldhavetheoppositeeffect:worldproductioncouldjumpbyupto50percentto6milliontonnes,floodingthemarketandcausingapricecollapse,ashappenedinNovember2000whenthemarketslumpedtojust$774pertonne.

Ultimatelysustainabilitycanonlybeachievedinthecocoasectorwhensmallholderfarmersareabletomakeadecentlivingandtheirchildrencanseeaviablelongtermfutureintheindustry.Thismeansmorethanjustincreasingproduction,italsomeansensuringthatfarmersareabletocaptureagreatershareofthevalueoftheindustryoverall.

Fairtradestandardsareaframeworkfor thesustainableproductionofcocoawithineconomicallysustainableagriculturalcommunities.Thestandardsincludea

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guaranteedminimumpricewhichhelps farmersplantheirfarmandhousehold budgetsforthecomingyear.TheyalsoincludeanadditionalFairtradepremiumforfarmers andtheirorganisationstoinvestinbusinessimprovements,communityprojectsandenvironmentalprotection.

Inthelonger-term,Fairtradehelpsproducerorganisationsandfarmersweatherlowandunstablemarketsbyencouraginggreater

accesstofinancing,relationshipbuildingbetweenbuyersandsellers,andimprovedcontractterms.

Manyfarmers’organisationsarecurrentlyapplyingforFairtradecertification.Wearethereforeworkingtoincreasecompanyengagementtowardsgreatersustainabilityandmoreequitabletradingpractices,recognisingthecontinuingchallengesfacedbymillionsofsmall-scalecocoafarmersaroundtheworld.

What you can do

• SwitchtoFairtradechocolateorkeepenjoyingFairtradechocolateifyoualreadydo.

• CheckoutthehugeselectionofFairtradecocoaproductsfromcakesandbiscuitstoicecreamandchocolatespreadatwww.fairtrade.org.uk/products.

• Lookforbeautyproductslikecocoabutterbodywash,lipbalmandbathcream,whichcreatenewsalesopportunitiesforcocoagrowers.

• SupportbrandsfromdedicatedFairTradecompanieslikeDivineandTraidcraft.

• AskyoursupermarkettostockmorechocolateandcocoaproductscarryingtheFAIRTRADEMarkandtoswitchtheirownlabelchocolateandcocoatoFairtradeifithasn’talready.

• WriteandaskyourfavouritechocolatecompanytoswitchtoFairtrade.

• AskyourlocalshopsandcafestoofferFairtradechocolate,hotchocolate,cakes,biscuitsoricecream.Useour‘DearShopManager’postcardstomakethiseveneasier.

• Askyourworkplace,localauthority,collegesandschoolstosupportFairtradewherevertheycan.Askyourfriendsandfamilytodothesame.

• CheckoutWDM’scampaigntoendtheopportunisticspeculationincommoditymarketsthatcausesdramaticrisesandfallsinthepricesofstaplefoods–seewww.wdm.org.uk.

FairtradeFoundation,3rdFloor,IbexHouse,42-47Minories,LondonEC3N1DYT:+44(0)2074055942F:+44(0)2079770101W:www.fairtrade.org.ukTheFairtradeFoundationRegisteredCharityNumber:1043886.VATRegNo:672545323.CompanyReg.inEngland&WalesNo.2733136