Sunday, July 28, 2019

The bitter sweet chocolate trade

Global demand for cocoa beans is surging because consumers in China and India - the two most populous countries on the planet - have taken a liking to chocolate, reports the World Bank. West Africa is where two-thirds of cocoa beans are produced. Respectively, Ghana and the Ivory Coast
 account for roughly 19 and 45 percent of this production. 

"That provides both countries significant market strength against powerful buyers," says Casper Burgering, senior economist at ABN AMRO. 

Yet when the two nations recently demanded higher compensation for their prized crop from global buyers, the chocolate industry called their bluff and on July 16, Ghana and the Ivory Coast gave in to pressure from the global chocolate industry and lifted a month-long ban on cocoa sales that was meant to push international buyers to accept a new minimum pricing agreement.

Cocoa farmers in Ghana and the Ivory Coast will get $400 premium per every tonne of cocoa beans they sell during the 2020-21 harvest season. The move may slightly boost earnings for West African cocoa farmers. But it is so far from the $2,600-a-tonne minimum price for which Ghana and the Ivory Coast were pushing for. The negotiations are largely considered a defeat in both these nations. setbacks like the recent fixed-pricing defeat are becoming all too common as forces outside Africa set the rules - and profit. Economists are also concerned that guaranteed compensation will entice other competing countries - such as Indonesia and Nigeria- to produce more cocoa, thereby increasing global supply and triggering a fall in cocoa bean prices.

This is especially painful in the Ivory Coast because the country has destroyed massive portions of its forests trying to satisfy the global demand for chocolate. In 1960, the West African nation had roughly 12 million hectares of forests. Today, nearly three-quarters of that forest is gone. In the 1960s, Ivory Coast encouraged locals and migrants to take up cocoa farming. Since then, annual production in the West African nation has quadrupled from half a million tonnes of cocoa to over two million tonnes in 2018. IMF data shows cocoa exports account for nearly 15 percent of the Ivory Coast's gross domestic product. 30 percent of Ivory Coast's cocoa production is conducted illegally - and spread across at least 220 protected forests and national parks. Ivory Coast is running out of farmland, it has to fight to increase farmers' earnings so they are not tempted to illegally grow cocoa in protected forests. 

Compounding the pain, many cocoa farmers in the Ivory Coast still don't make a living wage, even though their country is the world's top producer and exporter of cocoa beans that are the main ingredient in the $100bn global chocolate industry. Currently, North America and Western Europe are the principal markets for the consumption of all chocolate products. And because cocoa prices are set in auctions at exchanges in the West - and not in West Africa - the cost of Ivory Coast farm labour is not a determining factor in what is ultimately paid for chocolate. This means that though many people in the cocoa supply chain may earn more because of increased demand, many farmers must continue struggling to make ends meet. Only an estimated 12 percent of the Ivory Coast's small farmers of cocoa make what Fairtrade International considers a living wage, or $2.50 a day. More than a million of these small-scale growers live in poverty.

"We really have no say on the price against these international buyers of cocoa," Lezou told Al Jazeera. "They decide the price." 

The lion's share of money earned from cocoa is claimed by big-name international manufacturers and retailers. Producers receive only a mere six percent of the final product's value. Desperate to cash in on the guaranteed price - and without farmland to expand cocoa production - Ivory Coast growers could start tilling even more of their crops in protected forests just as their government is ramping up its efforts to stamp this practice out.

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