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Slip of the LIRP

06 November 2020

Hooray! Farmers in West Africa just got a per-kilo pay rise for their cocoa. This is a great step towards paying the Living Income Reference Price (LIRP) of which farmers need to escape poverty. Here’s how we’re pushing the industry on for even more progress. 

October 1st marks the start of the new cocoa year in Ghana and the Ivory Coast. And with it, the new farmgate prices for the main crop, determining what farmers are paid per kilogram of cocoa. These prices are set by each country’s government. Until today, they've been kept crazy low to keep Big Choco sweet. This has consequently kept cocoa farmers stuck in the poverty trap.  

More health, wealth and prosperity   
Thankfully, the new farmgate prices for the 2020/21 season are something to celebrate: up by 30% in Ivory Coast at $1.79 per kg, and 19% in Ghana at $1.82 per kg. That means more than 2.5 million farmer households will immediately benefit from better purchasing power, making access to healthcare, education and food a little bit easier.

Could this be the start of real change?  
Yes.. if we keep the momentum! Last year, the governments of both Ghana and the Ivory Coast took a big step to tackle poverty among farmers. This is reflected in the new prices. Although, these two countries still deliver 60% of the world’s cocoa. Despite this, they’ve historically had very limited bargaining power when it comes to setting the international price of cocoa. Seems Big Choco is a tough cookie to negotiate with.  

But by joining forces, these governments were able to demand that cocoa buyers pay an extra Living Income Differential (LID) of $400 per ton, part of which is reflected in the higher farmgate prices. Good going, governments!  

It goes a LID’l way  
​​​​​​​Before we get too patty on the backy, let’s be clear - the LID doesn’t enable farmers to earn a living income. Well then, what should famers be paid to make that possible? We use a holistic living income model to calculate the living income reference price for cocoa. In Ghana, a farmer should receive $2.10 per kg cocoa. In the Ivory Coast, this should be $2.20.  

That’s where Tony’s and the Fairtrade premiums come in..  
Hmm, as you can see, there’s still quite a gap to be filled between the LIRP and the farmgate price. That’s why we pay a Fairtrade premium, plus a Tony’s additional premium, to all the famers in our partner cooperatives. So, you know, they can make a living. But, sadly, that only affects about 10,000 of the 2.5 million West African farmers. We believe that paying the LIRP should be the norm, not the exception. 

Even though we see some positive developments, most cocoa farmers remain stuck in the poverty trap. And as we like to remind everyone, poverty is the root cause of modern slavery, illegal child labour and other social abuses in the chocolate industry. We all need to do more to make this a shame of the past. 

Let’s give the chocolate industry some LIRP   
​​​​​​​If you believe everyone deserves basic access to food, healthcare, and education, and that all chocolate should be 100% slave-free, go sign our petition to make companies take responsibility for the exploitations in their entire supply chains. 

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