Cocoa Boom and Bust
Increasing farmer resilience in the face of price volatility
Smallholder farmers account for more than 80% of the world’s agricultural production. Their economic success is crucial if we are to meet the food needs of a growing population. However, many smallholder farmers struggle with poverty, and this problem is made worse by the boom and bust cycle of cocoa growing.
The price of cocoa can be impacted by many factors – from changes in supply and demand to short-term weather events and long-term climate change. Price volatility is here to stay and, with increasing environmental concerns, even greater fluctuations are predicted for the future.
Lower prices directly impact farmer income, which can have profoundly negative repercussions on livelihoods, nutrition, health and education. This in turn increases the risk of deforestation as farmers seek other income revenues, or child labor as they try to cut costs.
According to the UN Food and Agriculture Organization, enhancing resilience is key to sustainable agriculture. For the cocoa sector to thrive, farmers must be able to secure a stable and profitable income. And to safeguard its future, cocoa must provide an attractive income for generations of cocoa farmers to come. Resilient farmers will be more inclined to maintain cocoa as their crop of choice. This is imperative for us to continue to run our operation and promote sustainable practices across the supply chain. While we can’t guarantee cocoa prices, we can and do help to strengthen farmers’ ability to deal with market-influenced price fluctuations.
Training, aggregation and diversification
We focus on equipping farmers with tools, the means and the knowledge they need to respond to the challenges. Aggregation through farmer cooperatives and groups plays an important part – ensuring farmers can secure a living income or better from the cocoa they produce. There are many benefits of aggregation, from improving access to markets and flexible finance, to promoting certification and providing training and tools to improve agricultural practices. All of these can increase resilience in the face of price volatility.
Diversification of income also enables farmers and their communities to better respond to fluctuations in cocoa profitability. This doesn’t mean lower cocoa production – through our training, better methods of farming should enable the same (or better) cocoa volumes from less land. This can free up land for additional crops, and time for alternative profitable pursuits.
Cocoa is still the most significant income provider in cocoa-growing communities, accounting for more than 75% of the cash income for three quarters of the population. However, when the full range of food production by a household is accounted for alongside income from other crops and professional activities, the dependence on cocoa is reduced to below 60%. By building up additional income streams, communities will be more resilient to fluctuations in cocoa, which will help to improve supply for our industry.
Supporting our goals
Our work to support farmers underpins our Cargill Cocoa Promise goals of increasing farmer resilience and community wellbeing, and protecting the environment.