World Is Running Out Of Cocoa

By Naveed Qazi | Editor, Globe Upfront

The international demand for cocoa has risen in recent years. 

As there is low supply and high demand, there had been a price rise and the scenario forced many cocoa beans grinding units to close their operations.

The price of cocoa has increased up due to Ebola crises and weather conditions such as El Nino when ocean temperatures rise in the eastern Pacific. However, since last year, there seems to be a slump in the cocoa prices.

Countries such as the Ivory Coast have been heavily dependent on cocoa production. It produces world’s 40 percent of cocoa. Around 7 million people are associated with the industry. Big companies such as Mars, The Hershey Company and Nestle mostly use Ivorian cocoa for the production of their chocolate and have been expanding into the region

Around 34,000 hectares of land have been destroyed by the farmers in Ivory Coast because they are planning to make parks and reserves. Young farmers are no longer interested in planting cocoa, while as old farmers are reaching their life expectancy. Add to that, most of the world’s cocoa farmers live in extreme poverty.

In order to save forests, the government is also trying to expel many farmers. They are starting the initiative from Mont Peko, an area that has an illegal population of around 28,000 people. Child labour has been another problem on Western African cocoa farms.

Analysts have often attributed a rise in illegal cocoa farming in Ivory Coast that is getting curbed. 

According to local cocoa farmers, hundreds of police and paramilitaries have also burned the crops on a massive scale. All the factors might further decrease the production of cocoa beans.

Ivorian Coast had introduced a forward sales system in 2012. Unlike big companies, this system created a problem for smaller companies because they couldn’t hedge their purchases. 

As local companies speculated a lot, some big companies made money, while others could not. It led to a grim situation lately, as Ivorian Cocoa Exporters Association revealed that they had a chance to default on around 80,000 tonnes of export contracts.

In March 2011, prices were at a 32-year high before falling 42% by the end of the year. The cocoa prices recovered in 2014 amid industry concerns of a cocoa bean shortage. Such fluctuation in prices means cocoa farmers can’t predict how much they will get for their beans or plan for the future. This makes cocoa business not lucrative.

Due to the political upheavals, the production has also been affected due to ten years of civil unrest in the Ivory Coast. In terms of production, the country’s closest rival is Ghana, followed by Indonesia, Ecuador and Cameroon.

One of the main reasons for the declining cocoa production has been the ageing trees. There also seems to be less supply of fertilisers available to farmers. The tree tends to grow in shade and has specific climatic and rainfall requirements.

Whenever, there has been a bad season, fungal diseases that include the black pod disease, swollen shoot disease reduce plant productivity and kill the tree in two years. It may eventually impact the whole regional market and so will the pollution due to illegal mining of gold.

As miners look for gold in streams and other water bodies, they use mercury, cyanide and other complex chemicals to extract gold from places. 

Heavy metals released during the process seep into the soil of nearby cocoa farms, reducing their productivity and making the crop hazardous.

The cocoa industry in Africa is troubled by other factors that include limited access to credit and the shift towards rubber production, a decision taken by many African farmers.

In Ghana, around $3 billion is earned on cocoa production. The Sehwi area in Ghana, which is the heart of cocoa production, has poor access to roads.

However, many press reports have been on the radar that alleges the government not paying enough bonuses to the farmers. The Bank of Ghana data shows that between February 2016 and 2017, Ghana’s revenue from cocoa exports has dropped by 10 percent. 

The world’s biggest cocoa port lies in the coast of San Pedro in Ivory Coast. There have been cases where buyers have not paid the farmers. Some 80 percent buyers have backed out of their contracts due to the increased price of cocoa set by the government. 

Fairtrade is an initiative that aims to make cocoa farming a more sustainable way to earn a living so that farmers can better support themselves and their families.

They aim to help farmers in workshops by making them learn how to negotiate contracts with traders. Fairtrade’s Minimum Price for cocoa is set at $2,000 per ton and for each ton, the farmer organisation receives an extra $200 Fairtrade Premium.

This incentive can be invested by the farmer to improve the efficiency of the organisation’s farms to increase the yields and quality of their cocoa, or in the community projects.

Quite lately, the Dominican Republic, that is known for producing high grade, organic flavoured cocoa, has committed to strengthening its cocoa sector for 40,000 farmers.

Despite the love of North Americans and Europeans for chocolate, the demand for chocolate has skyrocketed in Asia too, as the Chinese are rediscovering their cultural tastes.