The Cost of Cocoa: Chocolatier.co.uk examines the cocoa market

Posted on June 2 2011 by Jenny Linford

The recent political turmoil in the Ivory Coast, the world’s largest cocoa producer, has focussed attention on the issue of cocoa production and the cost of cocoa. “Because of the uncertainty in the Ivory Coast, international cocoa prices have been at their highest in more than three decades recently,” explains Gary Mead, editor of agricommodities website World Crops. “The Ivory Coast’s new president, Alassane Ousttara, called for a suspension of cocoa exports (which has now ended) and that helped push up the price. But there had been several successive seasons of a global supply-demand deficit so the ground for higher prices had already been laid.” In the commodities markets, cocoa future trading has increased considerably in volume which has also driven up cocoa prices.

Regarding the cocoa supply situation in the Ivory Coast, Tony Mycock, MD of independent chocolate supplier HB Ingredients, points out that “A lot of cocoa is still stuck out there. Peace has broken out, but we’re  not out of the woods yet. Ideally you don’t store cocoa beans in a hot, humid country. Half a million tonnes of cocoa, which in normal circumstances would be shipped out immediately, has stored since the beginning of the year, so you’re running the risk of the cocoa developing mould and deteriorating substantially in quality. One good thing is that the last cocoa harvest  was a very good crop in size terms. The mid-crop cocoa will be harvested about now, so it will be interesting to see what that produces.”

Despite the increased demand which has seen cocoa prices soar, a number of factors work against increasing cocoa production. “Cocoa is not an easy crop to grow,” points out Mead, “and can only be grown in fairly tight band around the Equator as it’s sensitive to low temperatures and needs plenty of rain and sun. Farmers have other less weather-sensitive and less price-volatile crops that they can choose to grow instead, such as rubber and palm oil.”

Mycock feels that higher cocoa prices will help to stimulate production. “Cocoa was too cheap for too long. People got out of it. Malaysia, for example, used to grow a lot of cocoa but when the price went down and stayed down they simply grubbed up the cocoa trees and replaced them with palms for palm oil. The current price of £1,800-£1,900 a tonne for cocoa is about right,” Mycock comments, “that’s a viable crop that’s worth investing in and looking after properly

There are a number of issues in cocoa production explains Simon Wright, a sustainable food consultant who helped create Green & Black’s range of organic and Fairtrade chocolate and now works with GO*DO chocolate: “Ninety-five percent of cocoa is grown by smallholders or family farms, with the size of the average cocoa smallholding being only 2.5-3.5 hectares. The farmers are paid very little, often $1 or less a day and many of them are elderly. In Ghana, a major cocoa producer, the average age of a cocoa farmer is over 60 in a country where life expectancy is 56.”

These small-scale cocoa producers, many scraping an existence, are simply unable to grow cocoa in a sustainable way, with soil degradation a very serious issue. Mead agrees that under-investment in production “is a major issue. Many of the trees in the Ivory Coast, for example, are now around 30 years old and well past productive life. The smallholder farmers use almost no fertiliser because it’s too expensive and, like any plant, the cocoa tree needs fertilising.”

Wright sees the solution in paying more money directly to the producers. “There is a long chain between the cocoa farmers and the chocolate manufacturer and at the moment there are too many middlemen who extract money without adding value. Cocoa needs to be cultivated by farmers not just grown so that a higher percentage of the world cocoa price goes to them. Traditionally, very few cocoa farmers have been paid a premium for cocoa.”

“With demand for cocoa increasing around the world and countries such as China and India begin to develop the taste for chocolate, how to make sure that there is sustainable cocoa production is the issue in the world of chocolate,” says Chantal Coady of Rococo Chocolates.  Her company have approached the issue of sustainably sourcing cocoa by building up a close relationship with the Grenada Chocolate Company. “Rising cocoa prices are an issue for everyone, but we’ve always paid way above the market price for the cocoa from our sister company in Grenada. Even if you do pay more for cocoa, it’s often only a small component in the cost of the final product.”

Rococo’s special close relationship with the Grenada Chocolate Company goes back some years. “We’d been buying from them for a couple of years, when I went to visit them in 2004,” explains Coady. “The relationship had been supplier and customer. Meeting them directly, it changed and we became friends with the company’s founders Mott, Edmond and Doug.”  Natural disaster struck, however, when first Hurricane Ivan hit Grenada later that year, then, within a year, Hurricane Emily caused devastation to Grenada’s cocoa crop. “We wanted to help as much as we could,” says Coady. “Out of the tragedy came the opportunity to buy this small 9-acre cocoa farm, part of a cocoa co-operative, which we run as Grococo, a joint venture with Grenada Chocolate Company producing fairly traded, organic Trinitario beans.”

A key point of difference for Coady about Grococo is that not only are the cocoa beans grown on the farm, but that these beans are then transformed into chocolate at source. “The bars are produced in a small factory next to the plantation where the cocoa beans are grown,” she explains. “What they’re doing – growing cocoa and making their own chocolate – is very unusual. It’s so challenging making chocolate in the tropics. They use solar energy, which is great. It’s good quality chocolate, made from Trinitario beans. We sell their bars direct and we also buy large bars and melt them down to produce our in-house range of bee bars and our in-house hot chocolate, so it’s quite a substantial element of our business”

Maintaining this relationship requires time and travel, “We visit once a year, Mott comes to England and we use Skype a lot! Agriculture had been in decline on Grenada so it’s great to see the people there taking pride in what they’re growing. We’ve learnt a huge amount about cocoa through this relationship and they’ve learnt from us too, about things like marketing and packaging.”

The price of cocoa is, however, only one issue facing chocolate producers. “It’s not just the cocoa that’s increasing,” points out Wright, “it’s sugar, milk powder and the cost of fuel used in production. Everybody in the world is paying more the raw materials; everyone will be paying more for chocolate.” Mead too sees this as inevitable. “I certainly expect prices of retailed chocolate to go up over the longer term. They need to in order to help encourage farmers to keep producing.”

Related Posts

Luxury Chocolate Valentine Gifts Delivered - Chocolat Lovers

Feel free to leave a comment...
and oh, if you want a pic to show with your comment, go get a gravatar!