Cost, Returns and Income Modelling of Farmer Cocoa Production in Côte d’Ivoire
From April to September 2022 PRO-PLANTEURS, a joint project of the German Ministry of Economic Cooperation and Development (BMZ), the German Ministry of Food and Agriculture, the German Initiative on Sustainable Cocoa (GISCO) and the Ivorian Conseil du Café-Cacao, implemented by GIZ in Côte d´Ivoire, undertook a socio-economic study with the objective to achieve a better understanding of the economic attractiveness of cocoa production in terms of costs and returns of cocoa farmers participating in the PRO-PLANTEURS project activities in Abengourou, Aboisso and Agboville regions in South-East Côte d’Ivoire.
In a first step important secondary data and PRO-PLANTEURS primary data were analysed. These comprised of the KIT-survey (Bymolt et al., 2018) among 1,485 cocoa smallholder households Côte in d’Ivoire, recall period 2015/16, the PRO-PLANTEURS Endline survey among 657 households, recall period 2019/20, and the Typology survey among 62 households, recall period 2020/21. Fairly robust results were achieved, especially on all cost and return items that involved cash transactions. However, the monetarization of activities not involving cash, e.g. the physical number (in workdays) and the monetary value of unpaid household/family labour in cocoa cultivation or unpaid work by mutual self-help groups was less solid. For these less solid data categories informed “guesstimates” and extrapolations were made.
In a second step, data were organized in a way to present costs and returns along a gross margin table/cocoa budget for three model scenarios with cocoa producers grouped in low (255 kg cocoa/ha), medium (476 kg/ha) and high performers (758 kg/ha). Knowing how much an average cocoa family needed as a living income per year it was possible to further calculate how much the labour force of the household must earn per labour unit in order to reach this amount. It also allowed the calculation of a farm gate living income reference price for cocoa and other important parameters.
The most important results were as follows. The actual farmgate price was 1.52 EUR per kg/cocoa for the 2020/21 season. The farm gate living income reference prices for the three performance levels were: 2.16; 1.72; and 1.59 EUR per kg/cocoa for low, medium and high performers. This shows on the one hand that in none of the scenarios a living income prices was reached, although the gap between the actual price of 1.52 EUR/kg is near to the high performing level of a farm gate living income reference price of 1.59 EUR/kg. It demonstrates further that technology level, competence and skills of cocoa are important. The higher the competence and skills, the better the performance and the lower the living income reference price. Likewise, also a Living Income Differential (LID) (the monetary amount to close the gap between a living income reference price and the actual price per 1 ton of cocoa) was calculated. The LID was 631.40; 194.20; and 62.10 EUR/ton cocoa or 699.80; 215.20 and 68.80 USD/ton cocoa for low, medium and high performing cocoa farmers. The amount of 400 USD/ton required by the LID set by Côte d’Ivoire and Ghana is situated therefore between the scenario of low and medium performing farmers in our model.
Our data set also allowed us to calculate a “viable farm size”. We defined a viable farm size as a farm that only grows cocoa, employs all its available household labour (without child labour), assumes an even demand for cocoa labour throughout the year and does not require external household labour. Assuming, first, that the model household has a total annual labour capacity of 651,8 workdays per year, and assuming, secondly, that the labour input for cocoa cultivation is 75; 100 and 125 workdays/ha for low, medium and high performing farmers, one arrives at a viable farm size of 8.7; 6.5 and 5.2 ha per household. This shows that the high performing household model needs less land to employ all its labour.
We are aware that despite making a dedicated effort to arrive at fairly robust data, well-informed assumptions and good calculations, the “average” or “medium” situation of cocoa farming is more complex. There are further important nuances, e.g., important differences between men and women headed households, which were not discussed here or in the publication. However, in the full paper we were able to present a plausible and transparent way how to arrive at farm gate living income reference prices and living income differentials.
The full paper of 70 pages in English and French can be downloaded under: Study_Cost_and_Returns_in_Cocoa_Production_PRO-PLANTEURS_2022.pdf (kakaoforum.de)