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Ivory Coast’s Cocoa – A Blessing and a Curse – 1

September 27, 2017

Cocoa beans piling up at Soubre, railroad transit point north of Abidjan, Ivory Coast (Cote d’Ivoire)

It’s called “Belgian or Swiss” (or French or Dutch) chocolate, but in fact there is no such thing. The main ingredient in chocolate, cocoa beans, does not grow in Belgium, Switzerland, France or Italy and never has. all these countries have ever done is add sugar and a few other ingredients, to make it more palatable to European and North American tastes.  It would be more accurate to refer to the stuff as Ghanaian, Ivory Coastal or Cameroonian Chocolate. Originally a equatorial Latin American product, today it grows largely in West Africa, East Asia and a bit in Mexico and Central America.

“It’s white people who eat chocolate, not us” commented a cocoa farmer from the Ivory Coast.

In recent years, the price of cocoa beans – the main ingredient in chocolate – hit its high point on in January of 2010 when a metric ton of cocoa sold for $3520 per metric ton (pmt). Since then its price has fluctuated wildly dropping to $2,110 pmt in May of 2012, rebounding in December, 2015 to $3350 pmt before collapsing again to under $2000 pmt in the Spring of 2017. After dropping even lower, the cocoa commodity prices have slightly rebounded to $2040 pmt now, in late September, 2017, still far below its highs of several years go. In fact, measured from the January 2010 high point, the price of cocoa has dropped some 40%, a decline which inevitably has profound economic and social consequences for the world’s main cocoa producers.

The world’s ten top cocoa producers include Ivory Coast, Ghana, Indonesia, Ecuador, Cameroon, Nigeria, Brazil and Papa New Guinea. Cocoa exports account for $9.5 billion in all. Of these Ivory Coast and Ghana alone produce nearly half of the world’s cocoa beans. Ivory Coast alone produces some 35% of global production, and these past few years – only adding to the global crisis of overproduction – Ivory Coast has had bumper crops. In good years – where demand for chocolate is on the upswing – such bumper crops would be nothing short of a national blessing for Ivory Coast, but in the current situation, with demand stagnating, it is unfortunately a curse, a heavy burden on a country in which a full two thirds of all employment is in cocoa production related fields and accounting for half of the country’s exports.

Cocoa producers are largely caught in a typical commodity bind.

They produce the raw material, in this case the cocoa bean, but are iced out of whole sale bean buying, transport, refining and retailing for the most part accounting for the bulk of profit-making in what are referred to as “commodity chains.” The overwhelming percentage of cocoa bean producers are “Third World” although the market for the end product is largely in the core countries of the global economy. In fact there is not much – if any – market for chocolate in the African cocoa producing countries. It what is a classic core-peripheral relationship, Ivory Coast, Ghana, Nigeria and Cameroon are thus dependent upon sales – and the ups and downs – in core countries of the global economy.

Per capita consumption leader by far is Switzerland, which in 2015 led the world, with each Swiss citizen consuming nearly 20 pounds of chocolate annually (only 19.8 pounds to be accurate). Germany (17.4 lb), Ireland (16.3) and the United Kingdom (16.3) aren’t that far behind. Per capita U.S. citizens only gobble down a mere 9.5 pounds annually. Major cacao importers (in bulk terms) are Netherlands (23%), USA (15%), Germany (9.3%), Malaysia (7.7%), France (4.4%), Spain (3.4%), Italy (3.2), Russia (2.3%), Turkey (2.9%)Canada (2.2%). Put another way some 65% of all cacao imports go to Europe and North America.

This situation puts the major cocoa producers – Ivory Coast and Ghana – in a classic bind. There is no domestic nor regional market for their main export product. West Africans are not bitten by the same “chocolate bug” as Europeans, North Africans. Thus the producers are dependent upon the economic vagaries of far away regions. Their fragile economies based upon the production of a few commodities (Ivory Coast – cocoa, coffee, pineapples and rubber; Ghana – gold, cocoa, timber, tuna, bauxite, aluminium, manganese ore, diamonds and horticultural produce) whose value fluctuates depending upon the market for these products in the world’s rich, core countries.

Furthermore, encouraged greatly by international institutions like the World Bank and International Monetary Fund, the production of such commodities is encouraged in such a way so that globally, they overproduce the product, be it cocoa, coffee beans or whatever. As a result, there is a tendency among many commodities – certainly cocoa and coffee – to overproduce globally – and by so doing, drive down the price of the raw commodity. This is exactly what has recently happened to world cocoa production. The market is glutted and the price producers can get for their unprocessed bean has plummeted, sometimes – as happened to Ethiopian coffee production a  few years ago, falling below the production costs. Yet the way that global commodity chains are structured, that raw cocoa bean prices have collapsed hardly impacts on the profitability at the far end of the chains (refining, distribution, retail) where profit levels are hardly effected.

Environmental Impacts of Ivory Coast Cocoa Production.

If declines in global chocolate demand have slowed cocoa sales and triggered growing economic woes in the Ivory Coast, overall, dependence on cocoa farming for the nation’s income has had negative environmental effects for the country as a whole and beyond. To add to its problems of cocoa production dependency, there are reports that the extension of cocoa plantations in Ivory Coast has destroyed some 80% of the country’s rainforests. “The world’s chocolate industry is driving deforestation on a devastating scale in West Africa, the Guardian can reveal,” a September 13, 2017 article in The Guardian announces. The article went on, “Ivory Coast is losing its forests at a faster rate than any other African country – less than 4% of the country is covered in rain forest. Once, one quarter was.” This environmental crisis has included the destruction of some of the country’s national parks. “In recent years, the annual rate of deforestation inside parks has doubled, and in both Ivory Coast and Ghana, it is going twice as fast as deforestation in unprotected areas” the article notes.

At the current pace, it is possible there will be no forests left in Ivory Coast by 2030.

Investigating the secretive government that controls 35% of global cocoa production has its risks. A French-Canadian journalist, Guy-Andre Kieffer, who wrote about the environmental effects of cocoa production disappeared in the Ivory Coast in 2004. He was “bundled into a car by uniformed men” and has not been heard of since. As a Guardian article on his disappearance notes: “His would not be the first tale of abduction, torture and murder in Ivory Coast, but potentially it could be the most explosive. ”

An investigation by “Mighty Earth” has concluded that:

For years the world’s major chocolate companies have been buying cocoa grown through the illegal deforestation of national parks and other protected forests, in addition to driving extensive deforestation outside of protected areas. In the world’s two largest cocoa producing countries, Ivory Coast and Ghana, the market created by the chocolate industry has been the primary driver behind the destruction of forests.

Among the main beneficiaries of Ivory Coast’s deforestation are some of the world’s biggest chocolate companies. Cocoa traders  sell to Mars, Nestlé, Mondelez, Cargill,  and other big brands. They buy beans grown illegally inside the country’s protected areas. All the companies know about the environmental damage cocoa production produces and, at least “in principle” what to do something about it…and yet little has been done to stem the tide of destruction.

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Links

Ivory Coast’s Cocoa – A Blessing and a Curse – Part Two

 

 

5 Comments leave one →
  1. joatsimeon permalink
    September 27, 2017 12:31 pm

    People grow cocoa — incidentally usually with hired labor which they pay just as little as they can — for their benefit, not ours.

    We buy it for our benefit, not theirs.

    Both sides in the transaction, as in any economic exchange, buy for as little as they can and sell for as much as the market will bear; Economics 101.

    In other words, the economics aren’t fundamentally different from growing wheat and canola in Saskatchewan; I’ve got relatives who do that for a living, and they can tell you all about commodity price fluctuations.

    Nobody makes the Ivory Coast planters grow cocoa; they do it because the profits are higher than any alternative crop. If it was a more profitable to grow coffee or yams, they’d grow those — again, Economics 101. If it paid them to go into processing the stuff themselves, they’d do that too, but it doesn’t. The terms “division of labor” and “comparative advantage” come to mind.

    As for encroachment on forest preserves, that’s the Ivory Coast government’s problem and their responsibility; they don’t need Europeans and North Americans in pith helmets to tell them what to do about it.

    As an aside, if they were growing food crops on that land there would be a lot more encroachment; the per-acre yield is so much lower than you need a lot more acres to get by, and their population is growing rapidly.

    Malaysia used to be a poor country dependent on exporting plantation crops; now they aren’t. There are lessons there.

    • September 27, 2017 5:39 pm

      Hi Joan…

      Well I don’t see it quite the way you do. The cocoa growing system was imposed upon the people of the Ivory Coast during the colonial period. They were discouraged from using their land for anything other than producing commodities for (mostly) European consumption. That system has continued until the present…It isn’t really a matter of “free choice” as you suggest. As for the profitability of the product…like many commodities, it varies, sometimes yes, sometimes no. The main problem is producing a product that has no domestic (or hardly) or regional market base and places the Ivory Coast economy at the mercy of foreigners. There are other forms of “not so subtle” pressure that maintain the system in place.

  2. September 28, 2017 3:58 am

    Yet again, a wonderfully written and informative article. Thanks for keeping us updated on these important global topics, Prof. Prince!

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  1. Ivory Coast’s Cocoa – A Blessing and a Curse – 2 | View from the Left Bank: Rob Prince's Blog

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