Fair Trade Cocoa: Breaking the Poverty Cycle

The low world market price for cocoa beans has traditionally meant that cocoa farmers are left in a cycle of poverty. Fair Trade, and other sustainable practices such as organic/ shade grown agriculture and co-operative development provide a means of breaking this cycle.

Here's how the cycle works:
Low market prices for cocoa beans...leads to a lack of resources for farmers...leads to cocoa farmers accumulating debt... leads to continued poor quality of cocoa...leads to country's inability to remain competitive...

Cocoa farmers are then left in the following predicament:

• They must secure loans to cover their families basic needs and medical emergencies;
• High-interest loans are made by unscrupulous intermediaries based on anticipated income from upcoming harvest;
• They try to pay back loans with harvest, but remain in debt due to high interest rate;
• They are left with no cash flow and often resort to migrating to the cities in hopes of escaping vicious cycle.

Fair Trade breaks this cycle in many ways.

Firstly, Fair Trade guarantees producers a fair price for cocoa beans. In 1999 the world market price for cocoa was US$1,300/ ton. By the year 2000, however, cocoa prices had reached a record low of US $640/ton. When a crop is so severely undervalued, farmers have no choice but to enter the cycle of high interest and unserviceable debt. This same year fairly traded cocoa guaranteed farmers a minimum rate of US $1,750/ ton for conventional cocoa and an additional premium of US $200/ ton for organic cocoa, thus breaking the cycle.

Secondly, the cycle is broken by purchasing cocoa from co-operatives. They strengthen the position of individual farmers in many ways. Co-operatives such as CONACADO provide loans to their members under conditions that are favourable to farmers. They sell on behalf of their members directly, without intermediaries, guaranteeing that the small farmer gets both a better price and an end-of-year profit. CONACADO is also mandated to provide training in quality improvement, including organic production. All of this means more and better resources available to farmers, allowing them to not only plan for the future, but also to invest in their own communities.