Paper short abstract:

Powerful first-tier suppliers vertically integrate to secure supply, binding framers to them via certification schemes and increasingly credit. Taking Ghanaian cocoa farmers as an example, we argue that these developments reproduce long-term dependencies between farmers and multinational buyers.

Paper long abstract:

The financialisation of agri-food chains has changed the ways in which farmers in the Global South integrate into global sourcing and production structures. The changing nature of their integration is driven in parts by a reconfiguration of the operations of first-tier suppliers, which increasingly operate akin to financial corporations. In their competition for a higher market share, first-tier suppliers have integrated vertically, binding farmers to them through certification schemes, and increasingly also financial services. The Covid-19 crisis has further accelerated the upstream penetration with a push towards the digitalisation of payments and credit. This paper explores the implications of this new mode of integration for cocoa farmers’ livelihoods in Ghana. We hypothesise that this expansion of banking services to farmers by first-tier suppliers establishes and reproduces long-term dependencies between farmers and first-tier suppliers by locking farmers into a relationship of debt, thereby securing bean supply for first-tier suppliers. These developments are analysed in the political economy context of a fall-out of the leading West African cocoa-producing countries Ghana and Cote d’Ivoire with major first-tier suppliers that source their beans from them over the Living Income Differential (LID). The direct or indirect resistance of some of the major buyers to pay the LID has resulted in a rethinking of producer countries on how to cut out these powerful middlemen in the cocoa-chocolate value chain. Frist-tier suppliers have responded with a renewed push for vertical integration through the extension of credit and other financial services to farmers to secure sufficient volume.