'Intelligent' fuel to the Fair Trade fire - Part 2

Part 2: the Global Cocoa Supply Chain

Small farms - Most cocoa is grown on small farms of less than 6 hectares. Cocoa bean production is labour-intensive and overwhelmingly a family enterprise.

The cocoa supply chain includes many intermediaries also. Small farmers typically sell their cocoa harvest to local middlemen for cash. The middlemen work under contract for local exporters, who, in turn, sell cocoa to international traders and the major international cocoa brands.

Therefore for small farmers, access to market or price information is difficult and as a result, many become increasingly dependent on these middlemen and receive smaller and smaller returns for their work. In bad times, many lose their only property - their land - and thus, their livelihoods.

The global market price for cocoa beans, averaging 78 cents per pound in August 2004, is determined on the future markets (explanation below) of the London Cocoa Terminal Market and the New York Cocoa Exchange. Of course, after every level in the supply chain earns a profit, farmers receive substantially lower prices per pound than the price on global markets.

What is a futures market?
The world price of cocoa is determined by the futures market. A cocoa futures contract is an agreement for a specified quantity and grade of a commodity (Cocoa or coffee) at an established point in the future and at an agreed upon price. This is a contract between the exporters and manufacturers.

The profitability of cocoa there depends on world prices that farmers' cannot control (they are price takers). Cocoa is known to be one of the most volatile commodity markets in regards to price. Supply of cocoa is extremely vulnerable to climatic changes and as such the price of cocoa may rise or fall considerably during the year. Currently, the Ivory Coast and Ghana are the world's leading cocoa producing nations. Conflict in the Ivory Coast region has hindered cocoa production and added considerable volatility to the cocoa futures markets. Demand, or Buyers – that is, the cocoa-processing industry and its clients – naturally wish to cover themselves against such price fluctuations.

The futures market in cocoa owes its existence to these uncertainties. Consequently this negatively affects the farmers as they get less profits, so then they look for ways to cut costs by using cheap labour, driving them to even resort to use slave labour.

Manufacturers
For a long time, many major chocolate makers have insisted that they bear no responsibility for the problem, since they don't own the cocoa farms. They buy from exporters on the international market. But there are other chocolate companies who manage to take this responsibility, and it would seem that if the bigger companies really wanted to reform problems in the supply chain, they have the power and ability to do so. With an annual sales of over $65 billion, Nestle SA is not only one of the world's largest manufacturers of chocolate products but also the third largest exporter of cocoa from regions affected by forced and abusive child labour. Through its subsidiary Nestle Cote d'Ivoire, Nestle maintains distribution, administrative and sales offices throughout the Ivory Coast, even as it claims to have little idea where its cocoa comes from or what the conditions are like on the farms with which it regularly does business.

With pressure on the chocolate industry mounting, on October 1, 2001, the chocolate industry announced a four-year plan to eventually eliminate child slavery in cocoa-producing nations, and particularly West Africa, where most of the world's chocolate is grown. If all went according to the plan, called the "Harkin-Engel Protocol," the "worst forms of child labor" - including slavery - would no longer be used to produce chocolate and cocoa by 2005.

The agreement was signed by the manufacturer's association and the World Cocoa Foundation; as well as chocolate producers Hershey's, M&M Mars, Nestle and World's Finest Chocolate; and the cocoa processors Blommer Chocolate, Guittard Chocolate, Barry Callebaut and Archer Daniels Midland. It was endorsed by a wide variety of groups including the government of Ivory Coast, the International Labor Organization's child labor office, the anti-slavery group Free the Slaves, the Child Labor Coalition, the International Cocoa Organization (which represents cocoa growing countries), and the National Consumer League.

The six-point protocol commits the chocolate industry to work with non-governmental organizations (NGOs) and the International Labor Organization in monitoring and remedying abusive forms of child labor used in growing and processing cocoa beans. A series of deadlines is part of the plan. For example, an independent monitoring and public reporting system is to be in place by May, 2002. Industry-wide voluntary standards of public certification are to be in place by July 1, 2005.

In addition, the chocolate companies agreed to fund a joint international foundation, run by a board comprised of industry and NGO representatives, to oversee and sustain efforts to eliminate the worst forms of child labor in the industry. Plus, the agreement provides for a formal advisory group to investigate child labor practices in West Africa, and a commitment by the chocolate companies to "identify positive development alternatives for the children" who might be affected.
(http://www.foodrevolution.org/slavery_chocolate.htm)


Stop the Traffik – Chocolate Campaign – WHAT ARE WE WAITING FOR?

"Do you remember the ICI (International Cocoa Initiative)? This is the body that was set up in 2001 which promised to deliver the Harkin-Engel protocol, with a clear aim to eradicate child slavery from the chocolate industry and establish certification on all farms by 2005. They failed. They announced another deadline of 2008 and reduced the definition of certification to handling and collecting data. We will watch closely to see whether the chocolate industry will finally admit that their process is not working and that they cannot keep delaying clear action to eradicate this crime leaving thousands of children caught today in this horrific life.

We are placing our Cocoa Pledge, which has growing international support (see the web site), as the best response to a failed industry protocol."

So now we’ve looked a little further up the cocoa supply chain and now it gets to us as consumers and hopefully the aims of Fair trade may make a little more sense:

Fair Trade is understood as having three components:

1. The organization of alternative trading networks;
Fair Trade started as a partnership between non-profit importers, retailers in the North and small-scale producers in developing countries. Many of these producers were at the time struggling against low market prices and high dependence on intermediaries. They saw Fair Trade as an opportunity to protect their livelihoods, bypass the middlemen and directly access Northern markets. Over the years, more and more Alternative Trade Organisations (ATOs) were created in different countries, often closely linked to volunteer groups and Worldshops. These networks of ATOs and Worldshops played a vital role in the development of Fair Trade as we know it today.

2. The marketing of Fair Trade labelled products through licensed conventional traders and retailers;
In 1988, in an effort to expand the distribution of Fair Trade products to mainstream retailers, a Dutch ATO, Solidaridad, found an innovative way to increase sales without compromising consumer trust in Fairtrade products and in their origins. The organization created a label, called Max Havelaar, which guaranteed that the goods met certain labour and environmental standards. The label, first only applied to coffee, was named after a best-selling 19th century book about the exploitation of Javanese coffee plantation workers by Dutch colonial merchants. The concept caught on: within years, similar Labelling Initiatives such as the Fairtrade Foundation, TransFair and Rättvisemärkt, emerged across Europe and North America in an effort to follow Max Havelaar’s footsteps and boost Fairtrade sales. The organizations launched their own campaigns and certification marks and originally operated independently.

In 1997, these organizations created Fairtrade Labelling Organizations International (FLO), an umbrella organization whose mission is to set the Fairtrade standards, support, inspect, certify disadvantaged producers and harmonize the Fairtrade message across the movement.

3. the campaign-based promotion of Fair Trade to change both purchasing practices and the rules of conventional trade.
In 2002, Fairtrade Labelling Organizations launched a new international Fairtrade Certification Mark. The goals of the launch were to improve the visibility of the Mark on supermarket shelves, convey a dynamic, forward-looking image for Fairtrade, facilitate cross border trade, and simplify procedures for importers and traders. The Fairtrade system has always been about global relationships and global standards of fairness - these were recognised for the first time with an international Fairtrade Certification Mark.

Active and concerned consumers are an important part of a civil society. Though young consumers cannot vote, their decisions about what to buy, and what not to buy, are a way of expressing their views on a range of consumer issues, including global and ethical ones.

According to Consumers International, consumers have a responsibility to use their power in the marketplace to "drive out abuses, encourage ethical practices and support sustainable consumption and production". This, they believe, will help achieve good government, fair and effective markets and protection for the environment.

Some of the cites I gathered this info from for your future reading:
http://goliath.ecnext.com/coms2/gi_0199-4653997/The-cocoa-industry-and-child.html
http://www.american.edu/ted/chocolate-slave.htm
http://www.fairtrade.net/about_fairtrade.html
http://www.foodrevolution.org/slavery_chocolate.htm
http://www.chicagofairtrade.org/aboutFairTrade/chocolate/chocolate-and-child-slavery-unfulfilled-promises-of-the-cocoa-industry/
http://www.stopthetraffik.org/chocolatecampaign/


Hope this helps people :-)
Til Next Time,

Heath