Cocoa growers face production shortage as EU anti-deforestation rules loom

As cocoa prices surge to record highs and Central and West African growers grapple with the impact of climate change, the cocoa sector is rushing to adapt its production to the EU anti-deforestation regulation (EUDR), which will take effect from January 2025.

EU consumers have particularly felt the impact of soaring prices. The bloc is the world’s largest cocoa importer, accounting for 60% of global imports, according to European Commission data.

In March, during the peak sales period for chocolate in Europe, cocoa prices skyrocketed to $10,000 (€9,212) per tonne on the New York futures market, and they remained at this level as of 25 April.

The surge coincided with dwindling cocoa grain supplies in key producing countries and increasing demand.

The decline in production notably affects the EU’s main cocoa suppliers—namely Ivory Coast, Ghana, and Cameroon. Forecasts for the short to mid-term remain bleak.

Speaking at the 2024 World Cocoa Conference held in Brussels this week, Michel Arrion, executive director of the International Cocoa Organisation (ICCO), cautioned that the factors driving prices up are likely to persist.

These include climate change, increasing chocolate demand in emerging markets, and the impact of the deadly swollen-shoot virus on trees, particularly in Ghana.

“The same causes will probably explain or cause the same consequences,” Arrion told journalists at the conference.

He noted that the large producers, including Ghana and Ivory Coast, have reached “a turning point”, predicting that they would struggle to return to the previous production levels.

A recent ICCO report also pointed at ageing cocoa trees as the most daunting factor for long-term market imbalances, as new trees will only reach their maximum yield after ten years.

Unfair distribution

At the same time, cocoa growers, most of whom live in poverty, are reaping few benefits of the price rally.

For instance, Ghana and Ivory Coast use centralised pricing systems, which involve setting “farmgate” prices, ensuring a baseline income for farmers but limiting their earnings during production drops.

An Oxfam analysis presented at the world conference revealed that chocolate giants Lindt, Mondelēz, and Nestlé had earned $4 billion (€3.7 billion) in profits from chocolate sales in 2023.

The fortunes of the Ferrero and Mars families surged to $160.9 billion (€150.44 billion) in the same period, surpassing the combined GDPs of the top world cocoa suppliers Ghana and Ivory Coast, which account for over half of global production.

The two West African countries introduced a $400 premium per tonne of cocoa to improve farmers’ living conditions in 2018, but the Oxfam report shows that the measure failed as buyers negotiated down prices.

“It’s hypocritical — chocolate giants are paying high prices now that the market demands it but have pushed back every single time that cocoa farmers have,” said Oxfam’s policy advisor Bart Van Besien.

Looming EU rules

Amid these challenges, the EU’s anti-deforestation legislation looms large.

Companies seeking to place on the EU market products covered by the rules — which affect cattle, cocoa, coffee, palm oil, soya, and wood — will need to prove with geolocation coordinates that they have not been sourced from deforested or degraded land after December 2020.

Hanne Vandersteegen, a regional counsellor at Trias, an international NGO with roots in Belgium that supports farmers in developing countries, praised the EUDR’s objective to halt deforestation but expressed concern that it could exclude small growers.

She stressed that farmers in countries like the Democratic Republic of Congo (DRC), an important cacao producer, could struggle to adapt to the rules, as cocoa production is less centralised than in Ghana and Ivory Coast.

“Buyers are shifting value chains to make sure that all cocoa is traced, but they are leaving behind quite a lot of producers (…) and that’s not the intention,” Vandersteegen told Euractiv.

“The EUDR states that it is the buyer’s responsibility to ensure that their value chains are sustainable and not just cherry-pick those [farmers] who have more money and most information,” she explained.

Leaders from producing organisations in Ghana and the Ivory Coast were optimistic about the implementation of the ambitious regulation but stressed the need for farmer support.

Aly Touré, ICCO’s producers’ spokesman and an Ivorian ambassador, told Euractiv that Ivory Coast is ready for the EUDR thanks to “fruitful” exchanges with EU authorities.

“As an Ivorian, I can tell you that we will be aligned with the EU rules on 1 January 2025,” said Touré, who also admitted that other ICCO members will “certainly face difficulties” implementing the anti-deforestation rules.

Meanwhile, Joseph Boahen Aidoo, the chief of Ghana’s Cocoa Board, stressed that the EUDR “will come at a cost to farmers,” noting that this could result in further price increases.

The European Commission also faces resistance from some EU countries pushing for a delay in enforcing the rules because of fears that the new legislation will increase administrative burdens for member states and European farmers.

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Austria and six other EU member states are seeking to delay the implementation of a pioneering anti-deforestation law in the bloc, and exempt small-scale farmers from the rules, according to a note circulated among member states head of a meeting with farming ministers on Tuesday (26 March), seen by Euractiv.

[Edited by Angelo Di Mambro and Zoran Radosavljevic]

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