Price Premiums

There are various possible channels for raising farmer incomes. First, the income derived in-kind and from the sale of other goods could increase with the adoption of agroforestry systems, and the planting of food and timber trees. Second, specialization in high-quality cocoa could increase yield incomes, this requires enabling farmer access to high-value cocoa markets. Ricketts, et al. (2014) find increases in premiums for fine quality of $200 to $500 per ton. Approximately 20% of cocoa produced is eco-certified (Vaast and Somarriba, 2010). However, there are significant differences in premiums. In West Africa, the net benefit of certification for farmers in Côte d’Ivoire is US$114, which is US$268 less than the net benefit of certification obtained in Ghana (KPMG, 2011). Price premiums generate a direct incentive for farmers to produce according to certain norms.

Productivity: Farmers may benefit two-fold from price premiums. First, through an increase in the price of cocoa, and second through the recommendations of certification agencies which may lead to higher yields

Adaptation: The rules required to get price premiums may be related to practices that increase the adaptation capacity. Price premiums increase the investment capacity of farmers into adaptation practices.

Mitigation: Furthermore, if prices considered cocoa bean quality, there may be an increased incentive for farmers to produce in shaded systems. Cocoa cultivated with higher levels of shade is likely more suitable for specialty markets because of its potential for higher quality (Jezeer, et al. 2017).