Cocoa-processing revolution, or unintended consequences? - A tale of a cocoa cartel

Abstract

Cocoa production increased by fifty percent in the first decade of the 21st century, in response to rising global demand for chocolate. Cote d’Ivoire and Ghana, the world’s largest cocoa beans producing countries, recently signed an unprecedented pact to impose a minimum cocoa bean price of $2,600 per metric ton starting in the 2020-2021 crop year. This floor price translates to a 22 percent price increase. While this move appears to tax exports during an era of trade liberalization policies, the African continent also seeks to ensure social protection of its farmers. The two governments that formed the pact view this as an effort to mitigate gradual declines in cocoa price that negatively affect their farmers. When the governments of Ghana and Cote D’Ivoire recently met with cocoa global value chain representatives in Abidjan, Cote D’Ivoire to finalize the terms of the pact, they settled on a system to provide a $400 per metric ton “Living Income Differential” in the event the price in international markets falls below $2,600 per ton. The big question– will this new pact succeed? Analysts disagree on the outcome. Some believe this move will ensure adequate livelihood for cocoa farmers, while others predict the pact will fail because cocoa processors will seek alternative sources of beans, thus forcing pact members to lower their prices. This article explores the primary forces that interact to determine the outcome of the pact: control over supply, reconfiguration of the global cocoa value chain, emerging trends in the enabling environment.The article examines these forces to determine the viability of initiatives to increase Africa’s share of intermediate cocoa processing, in view of this new pact and other forces at play.