Romy Appelman and Nienke Oomes (SEO, Amsterdam Economics) explore to what extent market concentration in the cocoa value chain is responsible for the widespread poverty of cocoa farmers.
The paper finds that market concentration among chocolate manufacturers and cocoa processors is not the key cause. Instead, there are two other key reasons why most cocoa farmers live in extreme poverty. The first is the fact that the productivity of cocoa farmers is very low, particularly in West Africa.
The second is that there are many cocoa farmers without realistic alternative income options. As a result, these farmers continue to supply cocoa even at very low prices. While raising productivity can help individual cocoa farmers to earn a better income, this cannot be a sustainable solution for all farmers, as this would result in an oversupply of cocoa and an even lower cocoa price. The best solution is to create conditions that would allow cocoa farmers to earn alternative income sources and become less dependent on cocoa.