(Credit: Simran Sethi)
On the surface, it sounds incredible. The world has an oversupply of cocoa, the colorful pods whose seeds are processed into chocolate. In my dreams, this is what makes Willy Wonka’s chocolate river overflow. Like many Americans, chocolate has been my lifelong companion. More of it could only be a good thing. But for farmers in West Africa—where 70% of the crop is grown—the scenario is a nightmare.
Five years ago, analysts predicted the world would run out of chocolate because people in China and India would become rabid chocoholics and gobble up the existing supply. Media went wild. The Guardian reported the world’s “stash of chocolate was melting away,” while The Washington Post’s headlines blared: “The world’s biggest chocolate-maker says we’re running out of chocolate.”
But the reality, Laurent Pipitone—the former head economist of the International Cocoa Organization (ICCO)—explains in The Slow Melt podcast, was more nuanced. The ICCO is an international organization that analyzes the cocoa market and oversees the designation of the different types of cocoa grown all over the world. “When we look at the past 20 years,” Pipitone explains, ”we had as many supply surpluses and supply deficits.” So those fears about a supply shortage were legit: farmers growing cocoa have gotten older, and younger farmers aren’t interested in taking their place for such a low-paying crop; aging trees are less productive; and climate change is already taking a toll on the equatorial band where the crop grows.
But the game changed, Pipitone explains, with the financial crisis of 2008. Global consumption had been increasing only because of growing appetites in emerging economies, with no growth in consumption of chocolate (in terms of volume) from traditional markets, such as Europe and the United States. Although the increase from developing countries was steep, it was small in terms of the actual volume consumed. “No growth,” he says. “Flat.”
Adding to this challenge was incredibly favorable weather in West Africa that resulted in a bumper crop—one that farmers had been told by analysts and news reports would be readily consumed by growing numbers of chocolate lovers who never actually materialized. The combination of a bountiful harvest and feeble growth resulted in a huge price drop: the price of commodity cocoa went from $3,000 a ton to $2,000 in a matter of months and has remained stagnant ever since.
Last Sunday, the Le Conseil du Cafe-Cacao (the regulating body for cocoa in Ivory Coast, the world’s largest producer of the crop) announced farmers would receive 700 CFA francs ($1.25) per kilogram for the current harvest—about $0.57 per pound—compared with roughly $1.96 they received for the same harvest a year ago. Ivory Coast has one large harvest in the fall and another in the spring. This is the lowest payment farmers have received for the primary harvest since 2012.
A recent study by the French Development Agency and Barry Callebaut (the world’s largest cocoa manufacturer) determined farmers in Ivory Coast earn about $1 per day for their labor, far below the country’s poverty level. These producers cultivate an agricultural product—a fruit—that takes up to four years to grow from seed and two years from plant grafts. They can’t put the brakes on production or switch to another crop at every market downturn.
It is believed we’re entering into another year of oversupply, which is why I view last week’s report in The Financial Times with caution. Contributing editor Emiko Terazono writes: “Asian chocolate demand is likely to increase by about 3 to 4 per cent during the current crop year, exceeding that of global growth of about 2 per cent, according to the world’s largest trader of agricultural commodities.”
This speculation has real-world consequences for producers who are already at the margins. Subsistence farmers grow 90% of cocoa but, Pipitone estimates, receive about 6% of the value of the chocolate market, an amount he describes as “very low.” So low, they are abandoning cocoa cultivation as a viable, sustainable career.
And no one can blame them.
Of course, the challenge isn’t limited to cocoa and chocolate. This is an issue for growers of coffee, wheat and other commodities—especially those where areas of production are decoupled from consumption.
Without cocoa, there’s no chocolate—a future that’s the stuff of my nightmares. So what do we do? Can chocolate lovers play a role in shifting this paradigm? That’s what we’ll explore in the weeks ahead.
More Info: www.forbes.com