Re: Fairtrade operations with cocoa farmers

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Fairtrade Africa extends its compliments to you and the Business & Financial Times for your role in promoting public awareness through business news.

We would like to draw your attention to an article that was published on your platform on 29th March 2021 with the heading “Is Fairtrade fair to cocoa farmers” which attempts to describe Fairtrade certification programme and its impact on farmers and their livelihoods.

We have reviewed the article and would like to point out some factual inaccuracies and misrepresentation and wish to bring the same to the attention of your publics.

Fairtrade would like to raise concerns about the eight-year-old study cited in the article and would have appreciated that the writer cross checked with more recent data on Fairtrade producers. Putting the data cited in the article in context of the Fairtrade’s operations in the last 8 years is misleading when one considers the current context.

Fairtrade operates a unique producer-centred model that creates a differentiation with other sustainability labels. Fairtrade premium distribution is significantly different from the operations of other certification or sustainability programmes in that Fairtrade does not make use of any intermediaries between farmers and traders.

Globally, farmers own 50% of voting rights of the entire Fairtrade system. We would like to state our facts under the following points:

1.Fairtrade makes a difference as an ethical sustainability label

Fairtrade was established primarily to empower farmers to gain competitive pricing for their produce, so that they can improve their livelihoods and the organisation remains passionate about this cause. Fairtrade certification is voluntary and membership based. This notwithstanding, we acknowledge that all farmers deserve living incomes and decent livelihoods within the cocoa sector and other agricultural sectors, so as an organisation, Fairtrade advocates with the relevant government bodies and other key industry players to bring about the much-needed change. For instance, in 2017, Fairtrade commissioned a study in Cote d’Ivoire which indicated that more than 58% of cocoa producers were living below the poverty line. This subsequently led to Fairtrade developing a Living Income Strategy.

The Living Income Reference price is USD2100 per tonne in Ghana and USD2200 per tonne at farmgate in Ghana and Cote d’Ivoire respectively. The development of the strategy has been followed with commissioning of some pilot projects in Ghana and Cote d’Ivoire which are currently at various stages. These pilots are aimed at supporting farmers to gradually bridge the poverty gap and support the farmers to earn living income.

At Fairtrade, we believe in making real impact in the lives of the more than 121,900 farmers across 8 Fairtrade certified cocoa cooperatives (2019 data), we touch out of the 1.2 million farmers within the cocoa sector in Ghana. This represents a significant increase from a total number of 93,436 Fairtrade certified farmers in 2017. Fairtrade certified farmers are empowered because they benefit from Fairtrade’s experience of advocating for equality in trade, ensuring a better future for farmers and standing up for their rights. The Fairtrade premium which is USD 240 per tonne received by our certified producers contributes to increased income at both organizational and individual farmer level. The individual farmers receive premium in the form of cash bonuses based on quotas agreed by themselves at the general assembly. This therefore gives them some leverage in terms of income compared with their colleagues who are not FT certified. The proceeds from this trade enable the farmers to expand their farming, provide for the needs of their families and bring about economic and social change.

The writer makes reference to a research by Nelson et al (2013) that shows no significant difference between Fairtrade and non-Fairtrade cocoa farmer in Ghana in terms of income earnings. In Ghana the only Cooperative certified before 2012 joined the Fairtrade programme since 1996. Most of the current Fairtrade certified producer organisations joined the scheme in 2012 and only started receiving premiums from 2013. Currently, there are a total of 121,900 cocoa farmers across 8 certified Fairtrade certified cooperatives in Ghana. Farmers’ experience of the economic and social benefit serves as a motivation for other farmers to join the scheme. This means the numbers of certified farmers keep increasing at a rate of approximately 4% a year since the last five years.

Therefore, using a study conducted on one certified Cooperative in 2013 to make a case today is very misleading and does not present the fact as it is.

  1. Fairtrade supports farmers to reduce overall production costs

As part of membership, Fairtrade offers value added services at no additional cost at all to producers. These services include trainings on good agricultural practices, climate smart approaches, and social interventions related to youth, gender and social protection. Fairtrade promotes Integrated Pest and Disease Management (IPM) among the cocoa producers, a practice that ensures protection of farmers, crops and the environment by promoting minimal use of agrochemicals that have residual effect on the soil and crops.

This system has been proven to be cost effective and a sustainable method of production. Farmers are trained on Fairtrade standards for cocoa and for small producer organisations. Fairtrade producer organisations (Cooperatives or Associations), and not individual farmers, pay a one-time membership fee of USD500, a subsequent annual subscription of USSD250 as members of Fairtrade Africa, the network of Fairtrade certified producer organizations in Africa and the Middle East. Audit fees are paid without any additional fees paid to individual auditors.

Cooperatives do not pay a 0.45% retention freight on board (FoB) price on cocoa beans sold as was claimed by the writer. 3. Fairtrade premiums Sale of cocoa beans under Fairtrade terms means farmers earn additional premiums in addition to the income. Fairtrade is the only certification scheme that has a minimum price and a fixed premium of USD240 per tonne sold. Fairtrade premiums are paid directly to Producer Organisations without passing through intermediaries and without deductions by same. Fairtrade does not certify Licensed Buying Companies (LBCs).

Total Fairtrade cocoa production in Ghana are 83,603 MT for 2016/2017 crop year, 83,970 MT for 2017/2018 crop year and 84,473 for 2018/2019 crop year whiles total Fairtrade sales were 23,652MT, 8,328MT and 6,777MT for 2017, 2018 and 2019 respectively.

Fairtrade premiums earned on cocoa sold on FT terms in Ghana for 2015, 2016, 2017, 2018 and 2019 are Eur 4,730,138, Eur4,105,847, Eur4,191,141, Eur1,410,993, and Eur 1,265,327 respectively. The decline in Fairtrade premium for 2018 and 2019 were due to the low volumes of cocoa beans sold under Fairtrade terms, deriving more from a demand from traders, than an issue of cocoa bean supply. This means that an increase in sales under Fairtrade terms would go a long way to benefit farmers. Fairtrade certifies only farmer cooperatives or associations. This means premiums may benefit cooperative with smaller number of farmers differently than for cooperatives with larger numbers of farmers. Fairtrade minimum price is calculated to cover the sustainable cost of production as well as margins for farmers to cater for livelihood and household expenses.

This is a unique pricing system that cushions the farmer in the event of fallen global cocoa prices. When FoB prices are above the Fairtrade Minimum Price, farmers are paid the FoB price but have the added benefit of Fairtrade premiums and other value addition services offered by Fairtrade. However, when FoB prices are below the Fairtrade Minimum Prices, producers are paid the differential directly to Farmers to make up for the lower prices in addition to the Fairtrade Premium and added services. In 2019, Fairtrade producers in Cote d’Ivoire received a differential payment of Eur 13,811,395 for 64,078MT of cocoa supplied on Fairtrade terms.

This differential payment was not triggered in Ghana because the FoB prices paid at the time by Traders was above the FMP of $2400/ton. Consultations are made with producers to determine the cost of production to be factored in the Fairtrade Minimum Price. Fairtrade minimum price and premium is set and reviewed through a very wide consultative process involving largely producers and other actors within the cocoa value chain. Fairtrade championed the idea of living income and it engaged government of both Ghana and Cote d’Ivoire right from 2018. It is worthy of note that Fairtrade was referenced in announcing the Living Income Differential (LID). Fairtrade’s bargain on living income was thus amplified hence any suggestion to create the impression that Fairtrade lost its bargain as stated by the writer is false. Fairtrade on a countless occasion has publicly supported the introduction of LID and went further to amend the Fairtrade Standards to recognise the LID as part of the price.

Fairtrade is a unique certification schemes because the farmers are empowered right from the trade negotiation down to the full transfer of the premiums. The farmers at the General Assembly democratically approve how these premiums are used based on their needs. The usage of Fairtrade premiums is decided by the farmers themselves through a democratic governance process with resolutions passed at the General Assembly of the cooperatives. Projects embarked on varies from one Cooperative to the other based on their needs. Projects such as building of schools, health posts, water points, and sanitation facilities.

Some cooperatives have also established Village Savings and Loans Associations to help their members. Other cooperatives have diversified income sources by venturing into other capital initiatives such as block moulding machine for rental to construction work, building office complexes for rental to local authorities in their area. These are possible because of the advantage of Fairtrade premiums. These premiums are paid by brands/ companies who are concerned about sourcing sustainably.

The certifications ensure that they are able to source with traceability. Fairtrade is the only certification scheme that ensures the farmers are truly the owners and have control of the cooperatives and contribute to the development of their communities. Fairtrade certified farmers democratically implement these community projects not because they have more than enough but rather, they think beyond their personal gain and contribute to the greater good of their communities. There are checks and balance within the system to ensure that farmers adhere to their own approved development plans to bring maximum benefits to their members. This is done through the periodic audit conducted by FLO-Cert officers (Fairtrade’s independent audit scheme) to ensure that premium mismanagement is avoided.

Africa also provides coaching and guidance to these producers to use their premiums judiciously to the benefit of all members. Since 2016, Fairtrade has moved from pure certification organisation to providing services beyond certification by providing farmer value through initiatives such as West Africa Cocoa Programme, (WACP), Dignity for All Programme, Sankofa Project and other Projects implemented with partners on Living Income, Climate change and Women empowerment.

Through these programmes, farmer cooperatives have been supported to develop organisational strategic plans, gender policies, build strong internal management systems and have benefited from trade shows as well as other trade facilitation platforms. Faced with the current reality of a global pandemic, Fairtrade continues to stand together with the producers and have introduced many initiatives with the support of partners to provide support to farmers.

During the pandemic, Fairtrade provided relief, recovery and resilience funds to its members on an application and needs assessment basis. So far, a total of Eur 175,605.54 has been disbursed to Fairtrade certified cocoa cooperatives in Ghana.

Through such support, farmers were able to invest in safety equipment as well as venture into income diversification projects such as animal rearing, other crops, bead making, baking, sewing of nose masks and vegetable cultivation. These initiatives have been greatly appreciated by farmers. Fairtrade expresses the considerations of its highest regards to your media house and would like this rejoinder to be published on your platform. Counting on your usual cooperation.

Yours faithfully,

Edward Akapire

Head of Region

SOURCEthebftonline.com
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