Cocoa Shortage Crisis Looms

This is an industry with a long historyof lousy husbandry.  It needs to comeunder a proper system of supply management owned and controlled by the growersthat regulates market access and arranges marketing.

We went through the same thing inthe dairy and egg industry when everyone was an under capitalized smallholder.  Industrialization has made the systempartially obsolete though parts of the need will always exist.  In fact we have a serious problem with wastewhich is not factored properly into the regulatory regime as a real cost.  The small holder used waste as an importantinput.  This becomes impossible with alarge herd. 

The business reality of the smallholding is that the buyers will discount the holder into slavery.  Also the buyers will always find apologiststo argue for a ‘free’ market which means only that they become price settersand the sellers are price takers.  Theresult is always decrepit cocoa forests.

Set up a proper regulated grower’scooperative and set land use rules and in short order you will have amplesuccessful growers optimizing their three hectare operation.

Besides all that, these are treesand this is the tropics.  Spread thetrees out so that ground crops are grown and animal husbandry is employed –this likely happens anyway.  We justtalked about growing wild trees in the Sahel.  Perhaps an occasional cocoa tree can beworked in.

It is clear that actual harvestand processing is completely within the ability of the small holder and workswell in a multiuse working farm that is not relying on this particular crop..

Savour that chocolate while you can still afford it

JESSICA LEEDER

GLOBAL FOOD REPORTER— From Saturday's Globe and Mail

Published Friday, Feb. 11, 2011 7:01PM EST

Last updated Saturday, Feb. 12, 2011 3:09PM EST

http://www.theglobeandmail.com/life/valentines-day/savour-that-chocolate-while-you-can-still-afford-it/article1904608/singlepage/#articlecontent

In the not-too-distant future, chocolate will become a rarefied luxury,as expensive as caviar.

John Mason, a Canadian expert on cocoa, first made this prophesy sixyears ago from his base in West Africa, the epicentre of production. He was confidentenough to repeat it, over and over, to the directors of the biggest chocolatecompanies in the world.

“Sometimes they were rude. Sometimes they were polite,” he said.“Behind me, they were sort of snickering.”

Today they treat him like a guru. An influential set of senior industryheavyweights flew to Ghanalast week to hear him speak; the talk ended with an unprecedented agreementbetween industry competitors and the government to establish a working groupthat will map out a sustainable future. It is the first such agreement of itskind in the cocoa world.

“Not that many year ago, this would have been impossible,” said Mr.Mason, executive director of the Nature Conservation Research Centre, anon-profit devoted to sustainable development and resource conservation.“People were not sufficiently aware of the magnitude of what is on the horizon,how serious the future is.”

The industry has been ignoring a looming supply problem, one that’sbeen brought into sharp focus by a political eruption in Ivory Coast, the world’s topcocoa-producing nation.

Productivity on farms is not keeping pace with demand. Fatal diseasesplague the crops. The soils cocoa grows in are depleted. Consumer demand,though, is growing. As standards of living improve in China and India, their new taste forchocolate keeps pace, feeding a worldwide consumption increase of about 2 percent a year.

“We’re in a bit of a crisis as an industry,” said Chris Brett,vice-president of corporate responsibility and sustainability for OlamInternational, one of the largest cocoa-buying companies in the world, whichsells beans to major chocolate producers, such as Cadbury, Mars and Nestle.

Alone, Ivory Coastproduces more than a third of the world’s cocoa beans; there is some Ivoiriencocoa content in nearly every mass-produced chocolate bar on store shelves. ButAlassane Ouattara, the presidential claimant in the country’s disputed Novemberelection, is using the crop as a political cudgel. His opponent, incumbentLaurent Gbagbo, has the loyalty of the army; cocoa revenues pay his soldiers.Recently, Mr. Ouattara imposed a ban on all cocoa exports, hoping it will forceMr. Gbagbo to leave office, a move which the U.S. and the E.U. support. So far,Mr. Gbagbo has refused. Fears are mounting that Ivory Coast will erupt in civilwar.

The uncertainty has set off panic among global chocolate powerbrokers.Their worry is less about this year’s harvest, 70 per cent of which has alreadybeen extracted (the season runs from October to February); the concern is overnext year’s crop – and the years that follow. Regardless of how much they canpay for increasingly expensive cocoa – futures hit a 30-year price high lastmonth – there will simply not be enough produced.

Both Ivory Coast andneighbouring Ghana,the world’s second-largest cocoa producer, are on course for an ecologicalimplosion. Their tree stocks are aging and sick; soils are depleted,temperatures are rising and rainfall is erratic. Young farmers aredisinterested in growing cocoa, which is associated with poverty, and they areleaving for low-paying but more predictable jobs in the city. Those who stay inrural farm areas are struggling to keep up with demand and have little toinvest in farm rehabilitation.

Few have any idea how to solve this multifaceted crisis. But Mr. Masonhas a notion. For half a dozen years, he’s been cobbling together a road map torelief that involves overhauling the current cocoa-business model. He outlinedthis last Thursday in a Ghanaian hotel conference before rapt cocoapowerbrokers and government officials.

If his plan actually moves forward, the future of chocolate might besaved.

‘Food of the gods’

For most of its history, cocoa has been associated with luxury andelitism. Its botanical name, Theobroma, translates literally as “food of thegods.”

The Mayans in Central America and Southern Mexicopioneered cocoa into its earliest edible form, a frothy, drinkable blend ofcocoa, spices and water. The laborious process – beans had to be harvested,soaked, dried, hand-ground and mixed into an elixir that was aerated by hand –gave the drink specialty status. Cocoa beans were more valued than gold; humanswere sacrificed ahead of annual harvests for good luck. Even then, cocoa was aform of money growing on trees.

As the global appetite for chocolate has risen, so has West Africa’s share of global production. Diseases andpests wipe out between 30 and 40 per cent of the world’s cocoa crop each year,but, by continually cutting into fresh forests to plant new crops, farmers inIvory Coast and Ghana manage to consistently supply between half and two-thirdsof the global supply, which hit 3.6 million tonnes last year. Of that amount, Ivory Coast pumped out 1.2 million tonnes; Ghana, which has higher quality (from richersoil) and more expensive beans, recorded 632,000 tonnes, according to theInternational Cocoa Organization. Unlike mostglobal commodities, cocoa is grown entirely by smallholders on plots of threeacres or less. Plots are small because producers tend to be subsistence farmerswithout the discretionary income to expand.

“Cocoais not a product that can be industrialized. It’s not like corn where you canplant this massive field and mow it down with a combine,” said FrederickSchilling, a chocolatier who launched a niche chocolate operation in Brazilafter selling his artisan start-up, Dagoba Organic Chocolate, to Hershey’s Inc.for $17-million (U.S.).

Cocoa’s sensitivity means it requires constanttending and pruning to produce good yields. The farmers who grow it rely ontheir families to help harvest and ferment the beans; machetes are their onlytools. That process – which gives off the stench of rotting fruit baking in thesun – takes place after the cocoa pod is split open and beans are dug out byhand and extracted from the pod’s white pulp. The beans are then spread ontrays made of palm leaves and left to dry in the sun in small batches. Onlyafter beans are perfectly fermented in small batches – the process createsflavour – are major chocolate companies interested in buying them. Undertakingthis themselves would be too costly.

Without corporate pressure to industrialize, productivity on cocoafarms stays low. Farmers in Ghana produce 300 to 400 kilograms of cocoa foreach hectare; some farms linked to research stations have tripled andquadrupled their output by adopting modern farming techniques, such as plantinghybrid cocoa seeds bred to thrive in local growing conditions and usingimproved crop husbandry to control notorious diseases such as black pod andwitch’s broom.

“A serious outbreak could change the chocolate industry overnight,”writes Orla Ryan, a former Reuters correspondent in Ghanawho this month published the book Chocolate Nations: Living and Dying for Cocoa in West Africa.“There simply would not be enough cocoa in the world. ... There is no producerbig enough to fill the gap in supply should the Ghanaian or the Ivorian harvestcollapse.”

The question is, who should pay for it? The answer, in John Mason’sview, is everyone.

Plan to save cocoa

Mr. Mason has a paradoxical plan to save cocoa: cut back operationswhile expanding them.

To prevent further ecological damage, farmers would be paid not to farmif they are growing on land prone to pestilence, disease or soil depletion.Farms on the most fertile soils, on the other hand, would get incentives toexpand.

Old trees would be replaced with young hybrids bred to grow in Ghanaianconditions; fertilizers would be used to restore balance and longevity to thesoil; crop-extension agents would train farmers to become stewards of theirland while coaxing maximum yields from the cocoa. Fallow lands would berestored to forests or other growth that is environmentally and economicallybeneficial.

“What we are proposing is to support, financially and technically, theintensification of the growing of cocoa on the ... most appropriate soils,”said Mr. Mason.

The optimal pilot ground is Ghana, the politically stablenation where leaders hope to boost production to the one million-tonne mark. Ifsuccessful, the program could be replicated in other cocoa-bearing countries,many of which are badly in need of help with sustainability.

The matter of who will pay for what has yet to be determined. Mr.Mason, first of all, needs the support of the government. The state-runcocoa-marketing board, called Cocobod, controls the sale of every bean. Mr.Mason also needs climate-smart funding from the United Nation’s Programme onReducing Emissions from Deforestation and ForestDegradation in Developing Countries. Banks and insurance companies thatparticipated in last week’s sustainability talks will hopefully help thetransition to a new model by offering credit to farmers who agree to acceptcrop insurance and replant old tree stock. There is currently no credit orinsurance available to farmers in West Africa(a common problem that plagues agriculture in developing nations).

Mr. Mason also needs the chocolate industry to stay on board. Earlyindications are good that the notoriously competitive companies are preparingto forge a long-term alliance in Ghana.

“Cocoahas never been able to do that,” Mr. Mason said. “The private sector is sosuspicious of each other.”

Mr. Brett, the cocoa buyer, said the magnitude of the situation hascreated momentum for co-operation. “No one can handle this on their own,” hesaid. “It’s a case of all coming together and bridging the supply chain. We cando a share,” he said.

There will, of course, be hurdles. If yields increase too much, farmerswill want to expand their operations. The only land left where to do this in Ghana isprotected forest, which is critical to conserve in order to mitigate thetemperature rise caused by climate change. The weather is another wild card: Noone knows how cruel climate change will be.

“If temperatures really rise, cocoa won’t be viable,” said RebeccaAsare, a forestry expert working with Mr. Mason. Under that scenario, chocolateprices would inevitably go up.

Some see a silver lining in that.

“There was a time in chocolate history, when chocolate was revered as aluxury item. I think there was a lot more respect for it at that time,” saidMr. Schilling, the chocolate maker. “This is going to teach moderation andappreciation on a whole new level.”

Perhaps those who find themselves tearing into Valentine’s chocolatesthis week would be well advised to savour them.