Does Pesticide Regulation Impact the Export Competitiveness of Major Global Cocoa Producers?

Transformation of the global governance in the cocoa sector with three characteristics: Diversification, flexibilization, and coordination

Pressure from the public and non-governmental organisations is pushing lead companies in the cocoa and chocolate sectors towards becoming more environmentally sustainable and socially just. Because of this, several sustainability programmes, certification schemes and delivery initiatives have been introduced. These have changed the relationship between chocolate companies, cocoa exporters, and small-scale farmers. This paper observes how large companies in the cocoa export and consumer markets are shifting away from their traditionally remote position in the cocoa sector. The pressure to ensure sustainability and justice has provoked more mutually dependent relationships with cocoa producers. Our analysis outlines the implications this emerging reconfiguration of global-local relationships has for procedural justice principles of interdependence and refutability, and the distributive justice principles of need and equity. These principles are important because they enable the different dimensions of inclusion: ownership, voice, risk, and reward. This paper highlights and qualifies arrangements surrounding these justice principles that manifest in the way five service delivery initiatives - associated with sustainability programmes and led by major buying companies in Ghana’s cocoa sector – are implemented. We show inclusiveness as an outcome of dynamic global-local relationships that are constantly reworked in response to smallholder farmers’ agency and state regulations. Portraying inclusiveness as an outcome of interactions changes its conceptualisation from a predefined ethical standpoint included in the design of standards to a result of unfolding mutual dependencies, which refashion how inclusive agriculture value chains work.

In the new millennium, the soaring economic growth in Asia and Africa, the increase of world trade, and globalization have boosted the global demand for cocoa. However, world cocoa supply could barely keep up with demand. These processes triggered a high volatility in global cocoa prices. Volatility induces uncertainty among market participants, hence preventing the market from working properly. It also makes the millions of cocoa farmers in the developing world highly vulnerable to poverty. Our first essay helps to inform development policies of the elements involved in the global cocoa bean market to understand the roots of the recent price volatility. A large volatility in the value of an agricultural commodity is linked to the inelasticity of its supply or demand. Therefore, we test the hypothesis that the price elasticities of the global cocoa supply and demand are low. We find that the global cocoa supply is extremely price-inelastic: the corresponding short- and long-run estimates are 0.07 and 0.57. The price elasticity of the world cocoa demand also falls into the extremely inelastic range: the short- and long-run estimates are −0.06 and −0.34. Based on these empirical results, we consider the prospects for cocoa price stabilization. The cocoa price volatility was treated with various unsuccessful methods in the past. A possible solution for reducing the price volatility would be the encouragement of crop diversification. This increases the price elasticity of cocoa supply by adjusting the effort and money allocation between the crops, thus decreasing price volatility. Our second essay investigates how the cocoa sector can be made more productive to increase supply and farmer incomes. We concentrate on Indonesia, which gives 10 percent of the world cocoa production. According to our results, technical efficiency growth and the increased chemicals use supported by government subsidies were responsible for the majority of average productivity gains (75 percent) between 2001 and 2013. Furthermore, we find large distortions in the input allocations. Hence, policies that encourage the adjustment of the cocoa farms’ input use would be highly beneficial. Moreover, because of the weather-induced volatility in cocoa production, policy makers should also promote investment in agricultural research and transfer of drought-resistant cocoa varieties to farmers. Additionally, the average efficiency of cocoa farmers is estimated to be around 50 percent. We find that farmers’ educational attainment and their experience in cocoa farming are significant factors that can increase the efficiency levels. Our research also shows the insignificant effect of existing agricultural extension services, farmer associations, and rural credit programs on the technical efficiency of cocoa farming. Hence, public policy should focus on adjusting the public extension programs, fostering the mutual benefits in the farmer groups, and developing viable credit institutions. In our third essay in Chapter 4, we look at the trade-off between smallholder cocoa intensification and the ecosystem in Indonesia and investigate the determinants of environmental efficiency in cocoa production. In our analysis, we apply a distance output function that includes cocoa production and the abundance of native rainforest plants as outputs. Our data set, based on a household and environment survey conducted in 2015, allows us to analyze 208 cocoa producers with both measured and self-reported data. We find that the intensification of cocoa farms results in higher ecosystem degradation. Additionally, the estimations show substantial average inefficiencies (50 percent). Increasing efficiency could lead to a win-win-win situation: more production coming from less hectares, with more native plants co-existing with cocoa on the remaining hectares. On average, the efficiency scores point to a possible production expansion of 367 kg of cocoa per farm and year, to a possible increase of 43680 rainforest plants per farm, or to a possible acreage reduction of 0.52 hectares per farm. Furthermore, we find that agricultural extension services have a substantial role in increasing efficiency. Finally, our results show that credit access does not have a significant effect on efficiency. Feasible agricultural credit services are viewed by numerous economists as a crucial prerequisite for improving efficiency, a critical part of encouraging development. We recommend linking credit to extension services as part of this effort.

Given the environmental concerns on the one hand, especially soil erosion and deforestation, and the hope that the global cocoa market offers on the other hand, cocoa production is a potential candidate to simultaneously guarantee a competitive return to investment for farmers in northern Haiti and mitigate the negative environmental impact of farming practices. It becomes crucial for policy makers and investors to know and understand the key elements of the decision to produce cocoa. Though there has been substantial effort to improve the cocoa sector in Haiti, cocoa production systems in Haiti lag behind in the area of sustainability. To address the lack of information on key criteria farmers rely upon to produce cocoa sustainably, this study identifies factors influencing the sustainable cocoa production adoption decision. The act of adopting sustainable cocoa production in this study is defined by the rehabilitation of old cocoa farms and the establishment of new cocoa plantings that fit into agroforestry management systems. This study also is a first attempt at describing the current state of sustainable cocoa production in Haiti. A qualitative method was used to conduct this research. The approach used was focus groups. Fourteen focus groups and seven individual interviews provided data used to answer the research question. Additionally, a SWOT analysis was conducted on the cocoa sector. Results of the investigation indicate that farm gate price, farm size, property ownership, land configuration and rural infrastructures, networking, and animal feeding practices were key determinants of sustainable cocoa production in northern Haiti. In addition to these factors influencing sustainable cocoa production in northern Haiti, the SWOT analysis identified key elements that constrained or might help with expansion and growth of the cocoa sector. Weaknesses include lack of maintenance and rehabilitation of farms. One of the best opportunities lies in physical proximity to the U.S. market and special trade agreements with favorable buyers from the European Union who are looking for the fine cocoa flavor of the Criollo variety. Black pods, drought and climate change, low producer price and corruption within farmer cooperatives pose the greatest threats.

Climate-smart agriculture (CSA) aims to transform and reorient farming systems to decrease greenhouse gas emissions, boost adaptive capacity, and improve productivity while supporting incomes and, ostensibly, food security. In Ghana – the world’s second biggest cocoa producer – the cocoa sector is challenged by increasing global cocoa demand, climate change impacts, as well as mounting consumer pressure over cocoa’s deforestation. Climate-smart cocoa (CSC) has emerged to address these challenges as well as to improve smallholder incomes. As with CSA more widely, there are concerns that CSC discourses will override the interests of cocoa smallholders, such as tenure rights, and lead to inequitable outcomes. To better understand if and how the implementation of CSC in Ghana can meet its lofty ambitions, we examine 1) the dominant CSC discourses as perceived by stakeholders, and their reflection in policy and practice, and 2) subsequent implications for cocoa smallholders through an equity lens. Through semi-structured interviews and focus group discussions with key stakeholders in Ghana’s cocoa sector, we find overwhelming consensus for an ecological modernisation discourse with the promise of a triple wins narrative that simultaneously stops deforestation, supports climate mitigation and adaptation, and increases smallholder livelihoods. Moreover, we find that implementing the CSC concept on the ground has generally converged around ‘sustainable intensification’ and private-sector-led partnerships that aspire to generate a ‘win-win’ for environment and productivity objectives, but potentially at the expense of delivering equitable outcomes that serve smallholders’ interests. We find that the success of CSC and the overly simplistic sustainable intensification narrative is constrained by the lack of clear tree tenure rights, complexities around optimal shade trees levels, potential rebound effects regarding deforestation, and the risks of agrochemical-dependence. Nevertheless, local governance mechanisms such as the Community Resource Management Area Mechanisms (CREMAs) may give cocoa smallholders a stronger voice to shape policy. However, we caution that the discursive power of dominant private sector actors may risk side-lining equity and challenges that could be detrimental to the long-term wellbeing of Ghana’s approximately 800,000 cocoa smallholders.

Sustainability remains high on the worldwide agenda in the cocoa sector as numerous problems threaten its viability. This study gives a broad picture of the Ghanaian cocoa sector and examines the initiatives of two Swiss chocolate manufacturers aiming at a more sustainable and future-oriented cocoa production in Ghana. The study reveals many challenges the Ghanaian cocoa sector is facing. The entire sector is highly regulated and controlled by the Ghana Cocoa Board (COCOBOD); the scope of influence of the private sector is limited. The COCOBOD shows rent-seeking behaviour and patronising attitudes. To attract investments from cocoa farmers, cocoa production would have to become a profitable business for them. The case study reveals that certification helps to increase both yields and income of the farmers. However, certification schemes are by far not sufficient to pull farmers out of poverty. As the projects of the two chocolate manufacturers focus on the diversification of the farmers’ income, they have the potential to improve the livelihoods of farmers. Because chocolate manufacturers, through their core business activities, cannot directly interact with farmers given the state control of the sector, its development is limited. Large-scale improvements of the whole cocoa sector go beyond the sphere of influence of chocolate manufacturers and must come from the Ghanaian government.

A number of international regimes have emerged in the last thirty years contributing to the global regulation of pesticides. These developments bear testimony to the work of pressure groups and epistemic communities in highlighting the environmentally polluting effects of hazardous pesticides, to which the regimes have contributed. However these regimes were only achievable because they also satisfied other values, given greater priority at the global level. Human health and global trade values were also at stake, rather than just the conservation of the non-human environment. This global picture is in contrast to the situation at the domestic level, where environmental values are prominent in the regulation of pesticides. It is more difficult for environmental values to be prioritized at the global level but the development of a global civil society has put environmental values on the international agenda and has led to them becoming more influential in the future development of international regimes. This article explores these arguments.

This paper employs the political settlement framework, diffusion theory, and data generated through a mixed methods design to examine the adoption of innovations and technology in Ghana’s cocoa sector, with particular reference to the Juaboso district, a major cocoa producing area. The findings indicate that while most farmers have adopted improved cocoa planting methods in rows, the use of hybrid varieties and application of chemicals because of perceived benefits of these innovations and state support in adopting them, the use of fertilizers on cocoa farms is very low due to political economy issues, economic challenges, and neopatrimonialism. Historically, corrupt state politicians have used the fertilizer subsidy programme to strengthen patronage networks and reward crony capitalists. We conclude that the socio-political dimension of innovation-diffusion overrides the technical-economic reasons often cited in the literature for the failure of cocoa farmers to adopt these technologies. Addressing neopatrimonialism and recent politicization of input distribution is needed to enhance adoption of innovation and improved technology in Ghana’s cocoa sector.

Reducing deforestation through value chain interventions in countries emerging from conflict: The case of the Colombian cocoa sector

Cocoa is a major source of employment, smallholder farmers' incomes, and export revenue in Ghana. However, by 2010 institutional constraints throughout the value chain were failing to sustain bean quality and cocoa production. A national-level innovation platform, comprising key public and private actors in the cocoa sector, was established in 2010 to analyse and act to address this concern. The members' initial inquiries revealed that: farmers indirectly were paying for the national mass spraying and Hi-Tech input programmes, both provided free at the point of delivery. As the largest components in the cost structure, these programmes to a large extent accounted for the low price paid to farmers for their beans; a volatile exchange rate regime meant that often the prevailing rate was not equal to its equilibrium level; policies that heavily taxed cocoa were destroying farmers' expectation of long-term profitability. This paper draws on data recorded from the beginning 2009 to end 2013 by means of theory-guided process tracing (TGPT), to show how the platform contributed to increased prices for farmers, to subsequent reform of the input supply arrangements, and to changes to the mass spraying programme. The key causal mechanisms identified are policy learning and progressive amendment of existing institutions. The paper concludes by drawing lessons for the role of an innovation platform.

Cocoa production under climate variability and farm management challenges: Some farmers' perspective

The implementation of the RSPO [Roundtable on sustainable palm oil] has been implemented since 2012 in the United States market, but the Indian market has not. This study aims to describe and compare the export performance and export competitiveness of Indonesia’s CPO [crude palm oil] trade in both markets. Comparison is done descriptively and the analysis of compare means independent samples t-test and paired samples test. The description of export performance measured by trade flow [value and quantity] shows the trade value of Indonesia’s CPO trade in the Indian market of USD 70,885.52 thousand with an average of USD 388,000.06 thousand in the 1996-2017 period. Whereas in the USA market it was 8,536,001 thousand USD with an average of USD 388,000.06 thousand. Export competitiveness with the RCA index in the USA market is higher than the Indian market, amounting to 26.50% and 19.24%. The results of comparing means independent samples t-test against trade value and quantity have a significant difference between Indonesia’s CPO exports in the Indian market and the USA market. However, Indonesian’s CPO export competitiveness with the RCA index does not have a significant difference in the Indian and USA markets. The results of the compare mean paired samples test before the RSPO 2006-2011 period and after the RSPO 2012-2017 period, found that the trade value of Indonesia’s CPO exports before and after the RSPO was not significant. While the trade quantity and RCA of Indonesian CPO exports there are significant differences in the Indian and US markets.

Climate change, soil water conservation, and productivity: Evidence from cocoa farmers in Ghana

Despite widespread attempts to ‘eat local,’ many of the lifestyle factors in the Global North rely on the production of agrifood commodities that can only be grown in tropical ecosystems, far from the dominant geographies of consumption. Chocolate, coffee, and palm oil represent a handful of consumer goods that are described as ‘tropical forest risk commodities,’  whose production threatens some of the last remaining biodiversity hotspots and stable carbon sinks. This research assesses the trade-offs between dominant approaches to poverty reduction in tropical forest landscapes – regions where global land use change is concentrated as forests are converted to agrifood commodity production areas to produce consumer goods that are core to global food systems. After Côte d’Ivoire, Ghana is the second largest exporter of cocoa (the main ingredient in chocolate). Ghana’s economy is highly cocoa-dependent, and cocoa provides livelihoods for about a quarter of the population, especially in rural areas where alternative incomes are limited. Although the cocoa sector contributed an estimated US$2.71 billion in government revenues in 2017, many cocoa producers live below the national poverty line.Policy responses to balance the trade-offs between global food production, climate change, and socioeconomic development have recently come to the fore in Ghana – the world’s second largest producer of cocoa. In 2019, the Government of Ghana introduced the Living Income Differential (LID), which requires buyers to pay an additional US$400 per ton of cocoa on top of the floor price. With low farmer incomes identified as a critical driver of multiple sustainability issues in Ghana’s cocoa sector, this differential is meant to be directly transferred to cocoa farmers in response to the persistent challenge of poverty in cocoa farming communities. Using the Q methodology, we engaged over 50 stakeholders from various levels (international policy experts, cocoa sector stakeholders in Ghana, and cocoa farmers) to understand how LID is perceived, including its potential to transform the rural poverty complex embedded in Ghana’s cocoa supply chain. While the LID is lauded for increasing producer price across the board, our findings indicate that the lack of regard for farmer diversity (i.e., tenure rights, sharecroppers, and caretakers), farm size, and land management strategies (agroforestry versus clearing forest to establish farms) risks undermining the ability of this pricing mechanism to reduce farmer poverty as a way to foster sustainability in the sector. Further, the LID is siloed from on-going sustainability governance efforts in the sector, such as zero deforestation cocoa. If the LID is delivered to farmers across the board without any quid pro quo for how cocoa is produced, the policy’s unintended consequences may include increasing deforestation in the short term, while lowering the world market price of cocoa in the long term as cocoa supply increases. We conclude with policy implications on why different perspectives matter in managing sustainability trade-offs in deforestation frontiers. This study provides important insights for understanding how to achieve multiple sustainability goals together.

Ghanaian smallholders grow one quarter of the world’s cocoa, but climate change, individual extreme weather events, such as droughts, as well as deforestation increasingly threaten cocoa production. Pertinent information could bolster adaptive capacity. However, in Ghana’s cocoa sector, relevant agricultural information is not available to all farmers, which can exacerbate power asymmetries. This paper focuses on how (i) agricultural and drought-adaptive information and (ii) socio-economic characteristics shape a cocoa farmer’s adaptive capacity. We conducted our study in the aftermath of 2015–16’s prolonged El Nino-induced drought that negatively impacted the livelihoods of cocoa smallholders across Ghana. In 48 semi-structured interviews and 12 focus groups, we asked smallholders how they responded to the drought to decipher how adaptive capacity compares between farmers receiving four different sources of agricultural information, and of diverse socio-economic status. Overall, agricultural information improved cocoa farmers’ adaptive capacity compared to those who received no formal agricultural information. Smallholders detailed adaptive techniques that would be accessible to, and thus replicable by, other poorly-resourced cocoa farmers. Shade tree management and income diversification were identified as pertinent adaptive actions. However, we identified a divergence between exposure to agricultural information and its transformation into substantive adaptive action. Additionally, informal information sharing between smallholders represents an underutilized resource by extension programmes. We found that adaptive capacity is also determined by socio-economic characteristics: particularly gender, and to a lesser extent formal education level, proximity to asphalt roads, and land tenure. Finally, we present evidence that framing adaptive techniques in relatable terms that resonate with farmers’ immediate livelihood concerns could narrow the adaptation deficit prevalent in Ghana’s cocoa sector.