Pass‐Through of Cocoa Prices Along the Supply Chain: What's Left for Farmers in Côte d'Ivoire?

Abstract

Most cocoa farmers in Côte d'Ivoire are trapped in a cycle of poverty and farming practices that degrade the environment. This paper aims to provide an in‐depth understanding of the price formation process for cocoa at each stage of the supply chain in the world's largest cocoa‐producing country. By examining potential inefficiencies that affect price pass‐through and could explain exceptionally low farm‐gate prices, the study seeks to identify segments of the supply chain where policy or market interventions could improve outcomes for farmers. Our approach couples econometric analyses using secondary cocoa price data and primary farm household survey data with qualitative assessments of institutional factors specific to the cocoa value chain in Côte d'Ivoire. Notwithstanding the country's highly regulated system of setting cocoa prices, we do not find evidence of inefficiencies that would explain persistently low farm‐gate prices. Nor do we find that the recently introduced ‘Living Income Differential’, a price surcharge on internationally traded cocoa, has benefited farmers. We conclude by advocating that the international cocoa industry strengthens its development programmes in cocoa‐growing communities, and that the government supports these efforts with better provision of infrastructure and other public goods. Such efforts could ultimately serve to increase the opportunity cost of cocoa production, drawing farmers into other employment sectors while improving the resilience and livelihoods of those who remain.