Hershey has countered the allegations saying it is fully complying with the LID payment PHOTO REUTERS

Siva Parameswaran–World News Editor

Cocoa-producing nations Ivory Coast and Ghana have flexed their muscles demanding chocolate majors including Hershey act fairly failing which they will be forced to take counteraction.

The American Chocolate maker is accused by the two major cocoa nations of unethical business practice by trying to avoid the Living Income Differential (LID) payment amounting to $400 per tonne. This fee is levied by the two nations to support poverty alleviation of the cocoa planters.

According to the two nations LID is paid directly to millions of Cocoa producers who are poverty-stricken.

The Cocoa regulators in these two countries in their letter have accused Hershey of sourcing huge volumes of physical cocoa on the ICE futures exchange thereby avoiding payment of the LID premium.

Sustainability schemes in limbo

Ivory Coast and Ghana which combinedly produce two-thirds of the World’s cocoa have said they are also barring third-party companies from running sustainability schemes in these two nations on behalf of the chocolatier.

Such schemes certify the cocoa produced and procured is free of human rights violations such as child labor and are grown in a protected forest without affecting the environment.

But Hershey has countered the allegations saying it is fully complying with the LID payment and shall continue to do so.

“Our concern is that by cutting off industry sustainability programs, cocoa farmers will no longer receive the benefits provided by our programs,” the company said in its statement.

However, the two major cocoa nations are not convinced with their reply. They say that although sustainability schemes may be targeted at poverty alleviation in cocoa farming communities, they are limited in coverage and not all farmers benefit.

According to them the LID which is applied to the farm gate price of cocoa reaches every single farmer in both nations. Now Ivory Coast and Ghana have withdrawn their membership with The Cocoa Merchants Association of America (CMAA). The nations accuse the body of abetting companies including Hershey avoid paying the LID.

CMMA is “condoning and conniving with Amerian companies against poor West African Cocoa farmers” the two nations regulators have said. The CMMA is yet to respond.

Serious allegations

The concept of LID introduced last year and pegged at $400 per tonne of Cocoa sales for the season 2020/20 has run into rough weather due to a dip in the demand for chocolates due to the Covid-19 pandemic and its associated recession.

“Some chocolatiers and trade houses have adopted covert strategies to circumvent the farmer income improvement mechanism with the aim of collapsing it” Yves Kone, Managing Director of Le Conseil du Café-Cacao and Joseph Boahen Aidoo, CEO of the Ghana Cocoa Board have said in their statement dated 30 November.

The duo in their letter has further said the use of the ICE exchange by Hershey was a clear indication of the Company’s intention to avoid paying the LID.

“The conspiracy and machinations by your company to evade the payment of the LID demonstrate your passive commitment to improving the incomes of three million West African cocoa farmers”.

A veiled threat was also issued to the company that they could lose their license to operate in both the nations due to what they allege as ‘unfair trade practices’

Ivory Coast and Ghana have also said they are reviewing their membership of the Federation of Cocoa Commerce a UK-based international organization that claims to protect and regulate the cocoa trade.

Experts in the Cocoa trade fear that though Ivory Coast and Ghana may be sending a strong warning to the trade but also should be able to sell their abundant stock.

While any rapprochement between the warring parties may take considerable time the farmers are sure to have a tough time till the next season.