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Living income model

Living Income model sets ‘living income reference price’ for cocoa in Ghana and Côte d’Ivoire.


Inequality in the cocoa chain and the resulting extreme poverty are the root cause of modern slavery, illegal child labor and deforestation. Fairtrade and Tony’s Chocolonely share their vision on Living Income and use the same model for calculating the cocoa price that enables farmer to earn a living income. Fairtrade and Tony’s Chocolonely have improved existing models, integrate widely accepted benchmarks and research and share their insights with the chocolate industry on the living income reference price for cocoa. We call upon all chocolate companies to make a living income the norm and start using this model. In Ghana a farmer should receive $2,10 per kg cocoa and in Ivory Coast $2,20


The living income model has a holistic view where productivity increase, income diversification, and paying a higher price are needed to get farmers to a living income. This is a shared responsibility from the cocoa market players, cooperatives and farmers.



  • The costs of living are taken from the Living income benchmarks for Ghana and Cote d’Ivoire as set end 2018 by the Living income community of practice (LICOP) which is supported by GIZ/ ISEAL alliance and Sustainable Foodlab.
  • The costs of farming are calculated from local costs for inputs and hired labor (beyond household labor) and fixed costs for materials and logistics. In Ivory Coast $418 per ha + $250 fixed cost, and in Ghana $ 322 per ha + $200 fixed cost[1].
  • The productive farm size is based on a viable farm size that can absorb the available family labor, taking into account a 17% reduction for cocoa rejuvenation[2]. The calculation of required labor per hectare is based on a study from New Foresight[3].
  • The realistically achievable yield is set at 800 kg/ha, based on use of inputs and good agronomical practices.
  • Other income as generated by the farming household through food production, sales of other crops and services is 25% of cost of living[4].

Each year, Tony’s calculates and pays the additional premium that enables cocoa farmers to earn a living income. Paying a higher price is part of our 5 sourcing principles: traceable beans, a higher price, strong farmers, the long term and productivity & diversification. To strengthen farmer organizations, we invest additionally in the capacity of cooperatives.

For cocoa season 19/20 the premiums are calculated as follows:

 

Ivory Coast

Ghana

Farmgate price

$1375

$1525

Fairtrade premium

$240

$240

Fairtrade minimum price differential

$235

(tbd)

Additional premium

$350

$335*

*Including Fairtrade minimum price differential

 

Footnotes
[1] Based on best practice use of inputs and living wage for hired labor (see appendix)

[2] In Ghana the viable farm size is much larger than actual farmsize. Therefore we use a reduced farmsize.

[3] Assessing Living Income from cocoa, New Foresight, 2017

[4] Based on actual farm diversification, e.g. demystifying cocoa (KIT)

[5] For Ghana, Fairtrade calculates the same Living Income Reference Price, based on slightly different parameters. For more background on the model please visit this page.

[6] Average from various sources (see appendix)
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