Tuesday, February 15, 2011

Cocoa Shortage Crisis Looms

This is an industry with a long history of lousy husbandry.  It needs to come under a proper system of supply management owned and controlled by the growers that regulates market access and arranges marketing.

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

The business reality of the small holding is that the buyers will discount the holder into slavery.  Also the buyers will always find apologists to argue for a ‘free’ market which means only that they become price setters and the sellers are price takers.  The result is always decrepit cocoa forests.

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

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

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

Savour that chocolate while you can still afford it


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

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 six years ago from his base in West Africa, the epicentre of production. He was confident enough to repeat it, over and over, to the directors of the biggest chocolate companies 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 industry heavyweights flew to Ghana last week to hear him speak; the talk ended with an unprecedented agreement between industry competitors and the government to establish a working group that will map out a sustainable future. It is the first such agreement of its kind 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, a non-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’s been brought into sharp focus by a political eruption in Ivory Coast, the world’s top cocoa-producing nation.

Productivity on farms is not keeping pace with demand. Fatal diseases plague 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 for chocolate keeps pace, feeding a worldwide consumption increase of about 2 per cent a year.

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

Alone, Ivory Coast produces more than a third of the world’s cocoa beans; there is some Ivoirien cocoa content in nearly every mass-produced chocolate bar on store shelves. But Alassane Ouattara, the presidential claimant in the country’s disputed November election, is using the crop as a political cudgel. His opponent, incumbent Laurent 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 force Mr. 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 civil war.

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 already been extracted (the season runs from October to February); the concern is over next year’s crop – and the years that follow. Regardless of how much they can pay for increasingly expensive cocoa – futures hit a 30-year price high last month – there will simply not be enough produced.

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

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

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

Food of the gods’

For most of its history, cocoa has been associated with luxury and elitism. Its botanical name, Theobroma, translates literally as “food of the gods.”

The Mayans in Central America and Southern Mexico pioneered cocoa into its earliest edible form, a frothy, drinkable blend of cocoa, 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; humans were sacrificed ahead of annual harvests for good luck. Even then, cocoa was a form of money growing on trees.

As the global appetite for chocolate has risen, so has West Africa’s share of global production. Diseases and pests 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 in Ivory Coast and Ghana manage to consistently supply between half and two-thirds of 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 richer soil) and more expensive beans, recorded 632,000 tonnes, according to the International Cocoa Organization. Unlike most global commodities, cocoa is grown entirely by smallholders on plots of three acres or less. Plots are small because producers tend to be subsistence farmers without the discretionary income to expand.

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

Cocoa’s sensitivity means it requires constant tending and pruning to produce good yields. The farmers who grow it rely on their families to help harvest and ferment the beans; machetes are their only tools. That process – which gives off the stench of rotting fruit baking in the sun – takes place after the cocoa pod is split open and beans are dug out by hand and extracted from the pod’s white pulp. The beans are then spread on trays made of palm leaves and left to dry in the sun in small batches. Only after beans are perfectly fermented in small batches – the process creates flavour – are major chocolate companies interested in buying them. Undertaking this themselves would be too costly.

Without corporate pressure to industrialize, productivity on cocoa farms stays low. Farmers in Ghana produce 300 to 400 kilograms of cocoa for each hectare; some farms linked to research stations have tripled and quadrupled their output by adopting modern farming techniques, such as planting hybrid cocoa seeds bred to thrive in local growing conditions and using improved crop husbandry to control notorious diseases such as black pod and witch’s broom.

“A serious outbreak could change the chocolate industry overnight,” writes Orla Ryan, a former Reuters correspondent in Ghana who 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 producer big enough to fill the gap in supply should the Ghanaian or the Ivorian harvest collapse.”

The question is, who should pay for it? The answer, in John Mason’s view, is everyone.
Plan to save cocoa

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

To prevent further ecological damage, farmers would be paid not to farm if 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 to expand.

Old trees would be replaced with young hybrids bred to grow in Ghanaian conditions; fertilizers would be used to restore balance and longevity to the soil; crop-extension agents would train farmers to become stewards of their land while coaxing maximum yields from the cocoa. Fallow lands would be restored to forests or other growth that is environmentally and economically beneficial.

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

The optimal pilot ground is Ghana, the politically stable nation where leaders hope to boost production to the one million-tonne mark. If successful, 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-run cocoa-marketing board, called Cocobod, controls the sale of every bean. Mr. Mason also needs climate-smart funding from the United Nation’s Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries. Banks and insurance companies that participated in last week’s sustainability talks will hopefully help the transition to a new model by offering credit to farmers who agree to accept crop insurance and replant old tree stock. There is currently no credit or insurance 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. Early indications are good that the notoriously competitive companies are preparing to forge a long-term alliance in Ghana.

Cocoa has never been able to do that,” Mr. Mason said. “The private sector is so suspicious of each other.”

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

There will, of course, be hurdles. If yields increase too much, farmers will want to expand their operations. The only land left where to do this in Ghana is protected forest, which is critical to conserve in order to mitigate the temperature rise caused by climate change. The weather is another wild card: No one knows how cruel climate change will be.

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

Some see a silver lining in that.

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

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

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