In 2014-2015 42 million tonnes of cacao was grown and traded from approximately 52 million farmers. Although cacao grows naturally at 20 latitude degrees north and south of the equator, 73% of supply comes from West Africa. Despite the fact South America is the natural home of cacao and South Asia and Asia Pacific are ideal growing locations; neither regions have a strong presence on the international market due to the rapid industrialisation of the commodity over the last years.
Ironically, many countries who grow natural cacao are actually net importers of the material; buying substandard cacao from international sellers even though they grow it on their own doorstep.
For example, The Philippines, in spite of being an ideal cacao growing country, is a net importer of cacao, mainly because the supply of growing materials, farmer knowledge and trading of cacao are all under-utilised. The Philippines domestic market is expected to double in the next 5 years and the world market will increase to approximately 5 million tonnes. Experts predict the world will be approximately a 100,000 metric tonnes shortfall of cacao per year against demand. Theoretically therefore there is competitive advantage and opportunity in supporting countries to develop unique domestic growing and supply markets.
There are five large chocolate and confectionery companies in the world who control more than half the European market for consumer chocolate. The firm which has the largest share in the world market requires about 300,000 metric tonnes of cocoa beans annually. The top 6 chocolate manufacturers are estimated to control around 60% to 70% of the world market of cacao specifically. Concentration in the chocolate manufacturing industry is attributed mainly to the very heavy costs of branding and marketing.
However, there is little organisation or resources at cooperative level to supply farmers with the training, materials, fertilisers and access to trade to help them enter the world market. Generally, these farms create low quality wet beans which are sold on the market at less than half the market price that their colleagues receive in West Africa. Farm gate prices for cacao from the South Asia and Asia Pacific regions are on average, 70-80% the international terminal exchange price.
Put 3 football fields together and you have a small cacao farm. In some countries this is all the local land laws allow anyone to own to grow a crop. Having a tiny piece of land is the least of a farmers worries, because if pest/disease doesn’t wipe out the crop, an earthquake or freak-wave might. Sadly, even if as a farmer you survive these extreme events, you will probably die early from pesticide exposure, or starve because you can’t make a living wage from the world’s most delicious pod. 90% of the world’s cacao farm holdings are between 3-5 hectares. In total, these farms provide about 40-50 million people with jobs in the wider industry around the world.
Most farmers in these regions work by themselves, (most farmers in West Africa work within their family units) while others have managed legally, and secretly to cooperate (South and Central America supports cacao cooperatives generally more than other geographies). However, approximately only one fifth of cacao farmers manage to get in touch with people locally to share knowledge on farming, processing resources and talk about prices and/or selling their beans together.
Time is running out in real terms of cacao farming continuity as traditional farmers age and with the attraction of cities and new careers, many of the next generation of potential farmers are leaving the family business. Cacao is simply not attractive for the youth of today. As they watch their families go through poverty, and see the new world via YouTube and social media, it is very difficult to bridge the gap between. Low prices and high volatility has systematically bred cacao farmers into multigenerational poverty.
Working for less than 2 USD a day, farmers manage to produce about 12 billion USD worth of value for the market. While most of the work is done on the farm, most of the profit sits with corporations who brand and sell chocolate.
Countries growing cacao such as The Philippines which are net importers of cacao demonstrate the economics of how the commodity of cacao has evolved makes no logical sense. Quality, as we might know it from coffee and wine does not have the same application in cacao, or chocolate.
Vague descriptions of fine and flavour are used more like names than descriptors. Premium is a stamp and has little to do with certification from organisations like UTZ, Rainforest Alliance or FairTrade.
Though the cacao industry has certified more crops over the years there is zero understanding of this process because sometimes the same crop gets multiple certifications and many times a certified crop doesn’t even get sold as certified because the extra costs are not interesting to and therefore not covered by traders.. Notably however, the demand for certified cacao in niche markets is increasing and the trend towards transport supply chains is becoming more popular within the end consumer.
All this means for the farmer with the 3 football fields of cacao plantation is that he or she has no idea whether they should invest in certification or not. The return on investment in any part of the cacao chain is volatile for a farmer, no matter how long the farm has been in their family or how much they do to care for the earth.
There are 10 points of knowledge, across 10 stakeholders that need the same information to create a level playing field. That is what we research and what we have taught to 600 people in 6 countries so far.
Quick Infos >
Cacao trees yield pods after 18 months
It takes a tree 4 years to reach full yield capacity
At full capacity you should average 70-100 pods per tree per year
There are approximately 30-40 good beans per pod.
This means you should be harvesting anywhere from 2,100-4,000 beans per tree per year.
How it works >
Cacao will often go through many levels of traders between the farmer and manufacturer. In most countries, especially the ones we work and study in, there is no clear engagement between local, and regional traders, nor integrated groups because all have versions of buying both farm direct and via each other. Invariably it can look cannibalistic and opportunistic and chaotic all at once.
Producers of industrial chocolate around the world are generally of two types:
Groups, who have an integrated supply chain, who produce their industrial chocolate for their own use (own brand chocolate, or bakery goods).
Industrial processors who supply most of their output of couverture chocolate to general market suppliers.
The majority of ships leaving ports with the most cacao beans are funded via integrated groups working tightly with multinational corporation grinders and chocolate companies. Sometimes, they even connect fruits or flowers together. In The Philippines you can see cacao and banana cooperatives working together. Ecuador connects roses and cacao as well.
About 90% of current production of cacao beans comes from smallholders with farm sizes ranging from 1 to 3 hectares in regions 20 degrees north and south of the equator. Cacao is a a very intense crop to farm because it is very sensitive to sun and rain; needing a delicate balance of both. In the world of globalisation and integration, the Theobroma Cacao tree is best suited to small farm holdings. Significantly, there is almost a personal relationship between a farmer and the land when there are just a few hectares to manage, and an astute farmer who has the training they need and can best monitor weather and pest to manage and take care for both land and trees. This is the big difference to large farm holdings where trees blend in with each other with integrated nuances in terms of the health of the tree and the land; because they are oblique.
The downside of small farm holdings is that the are often poor yielding in terms of income and unless the farmer works together with neighbours to share resources, ideas, and access to sale, they can often fall into poverty;not to mention what the manufactured market price of cacao can do for the value of their harvest. Cooperatives can range between 40 - 300 hectares in size and can yield, when farmers work well together, a sizeable crop. This can make a good presence for negotiating fair and direct prices for the team.
Exporters are sitting on the fringe of the cacao trade. Their role is to basically buy beans from traders, store them in a warehouse and sell to regional buyers for group processing. Often, these exporters are small compared to the logistics divisions of integrated groups and large grinders who own their own storage and logistics divisions themselves.
Integrators purchase wet beans from collectors and traders, ferment, dry, sort and grade them for quality, and then sell them to buyers in Europe and the USA. In many cases, they are sourcing for one or two global grinders and chocolate manufacturers.
There are six key issues in cacao and are all are based on food sovereignty and agroecology: