The purpose of the project is to demonstrate that an integrated approach that combines higher prices (a living income reference price) as well as improved productivity (including better agricultural practices, inputs, diversification) is needed to improve cocoa farmers’ household incomes.
Mission allies in the Open Chain pay a Living Income Reference Price for cocoa beans. For 2022-2023, this means on top of the farmgate price of 1344 dollars, 1096 dollars of premiums are paid to reach the LIRP (or 82% above the farmgate price). Simply paying this higher price does not result in a living income for farmers however; it needs to happen in tandem with other activities.
As such, the project has worked on increasing productivity and diversification through the implementation of Individual Farmer Development Plans (IFDP) and coaching. Digitization of these plans at the coops allows them to service their farmers better and gain efficiencies of scale in their procurement.
Lastly, the project helped create labor gangs equipped with technical expertise and dedicated machinery. Farmers have the option of reinvesting the premium they receive in technical assistance of such a gang.
When it comes to progress on closing living income gaps, it is evident that single interventions focusing on productivity alone are not enough. Farmers who receive a higher price for their cocoa are incentivized to increase their productivity. This means a smart mix of interventions, higher cocoa prices including certification premiums being a critical part of this, combined with investments in productivity increase general household income levels and reduce living income gaps.
Tony’s Open Chain Living Income Analysis showed that premium payments including the Living Income Reference Price (LIRP) contributed 21.4% of income earned by cocoa farmers on average through cocoa in 2020-21. This was even higher in 2021- 22 at 34.8% when farmgate prices dropped further. Simulations demonstrate that if all cocoa is sold through Tony’s Open Chain at LIRP level, with premiums directly benefiting farmers, the average living income gap significantly decreases, and the median cocoa income rises to approximately $6,000 USD per year.