Fair Trade Cacao Has Many Middlemen
When there are less middlemen, the cacao farmers benefit. In a typical cacao sourcing model, smallholder cacao farmers sell their crop to a cacao collector, often referred to as a “coyote”, because they do not have the farmer’s best interest in mind and will often pay the farmers poorly. This cacao collector then resells the cacao to a regional or national processor, where cacao is aggregated and prepared for export. Large international trading houses in Europe and the US will purchase these exports, and finance and warehouse them. Then a chocolate company will buy the cacao from the trading house to make chocolate.
For “Fair Trade” cacao, this model is essentially unchanged except the cacao is sold with a 10% premium, and a separate paper trail is maintained. Often the supply chains for commodity cacao are so complex, so the chocolate company purchasing the cacao beans doesn’t even know and couldn’t figure out if it wanted to, who farms the cacao. This lack of transparency can lead to troubling violations of common sense ethics in the supply chain, like slavery and child labor. Fortunately this is typically addressed by the additional paperwork of Fair Trade, but you can see how the 10% premium paid for cacao quickly gets lost in the long supply chain.
Direct Trade Cacao Pays Farmers Much Better Prices
In contrast to the commodity supply chain outlined above, in a direct trade sourcing model, smallholder cacao farmers sell their crop directly to a locally owned cacao organization. The organization buys, ferments, dries, conducts quality analysis, and prepares the harvest for export, all under one roof. In the countries we work with, these organizations are: Maya Mountain Cacao in Belize, Cacao de Colombia in Colombia, Cacao Verapaz in Guatemala, and Kokoa Kamili in Tanzania. With the help of a specialty cacao broker, Ora Cacao can purchase directly from these organizations and a container of cacao can be shipped from their organization to our factory.
Because our supply chain is short, we can pay a higher price for cacao at an earlier stage in the process. It is also far easier to ensure transparency and know exactly who our farmers are. Our higher prices are also correlated to the premium quality produced by the locally owned cacao organization. Read our article on Wet Cacao Purchasing to learn more.
So, Is the Fair Trade Premium, Fair?
The well known fair trade certification pays a 10% premium to farmers above the market commodity rate. While this sounds like a step in the right direction, it is totally insufficient.
Commodity rates paid to cacao farmers are already below poverty level, so a 10% increase isn’t enough to have a substantial impact on the quality of life for the farmers and their communities. Because of these low prices, in West Africa, where 70% of the world’s cacao is grown for export, cacao farmers will bulk up their bags of cacao with non-cacao material like rocks, dirt, and sticks before selling their cacao. It’s a commonly accepted practice - so all the large chocolate makers have de-stoners in their production line, equipment specifically made for sorting out rocks. Up to 10% of a shipment of cacao may be foreign material!
This shows even the fair trade premium isn’t even enough for the farmers to invest more time and resources into a higher quality cacao product, let alone, make a good living.
So basically, the 10% fair trade premium is just enough to not have rocks in our cacao. We certainly don’t want rocks in our cacao. Rather, we desire to create a truly mutually beneficial relationship between the cacao farmers and the cacao buyers.
We desire a system in which the farmers desire to invest more time and resources into a higher quality cacao product and make a good living. This is where the new direct trade model offers a complete break from the "fair trade" band aid on a broken commodity cacao system.