Fact of the Month

Nearly 50 million people worldwide depend on cocoa as a source of livelihood.
Source: The World Cocoa Foundation

Feature of the Month: Cocoa Investing

It appears a number of investors are going cuckoo for cocoa investing. The little black bean, used to make one of our favorite delights, chocolate, has had its price greatly fluctuate in the wake of rampant speculation and purchasing. For the past 4 years, cocoa production has fallen short of consumption due to particularly harsh weather patterns and the destruction of cocoa plants due to pesticide-resistant fungi. ABC reports Armajaro, a British hedge fund, is trying to capitalize on the situation and has bought up 7 percent of the world’s annual cocoa-bean supply. Seven-percent is significant, considering the scope, and the purchase has cocoa prices skyrocketing.

Does this mean that there’ll be more cocoa going around? It’s very likely. Roughly 70 percent of the world’s cocoa is produced in West Africa, by rural farmers. In fact, Cote d’ Ivoire produces nearly 2/3 of the global supply! These farmers are often uneducated in the realms of speculation and distribution, and to a greater extent, economics in general. With a rise in price, they’ll scale up production. Although more cocoa is being made, it doesn’t necessarily mean that more will be distributed. This means that processors will be keeping the beans refrigerated, and the overproduction will eventually drive prices down.

In the meantime, however, as the prices rise, Confectionery News predicts speculation will continue to run rampant. The cocoa/chocolate industry is similar to many other foodstuff industries in that there are producers, buyers, processors, and distributors (processors and distributors are often one and the same). Producers grow and then sell the beans to whomever will buy them, and the beans are often stored for quite some time as they shift hands. When the beans are finally ready to be made into chocolate, they’re sent to the processors. Currently, the largest processor of cocoa beans in the world is the Netherlands, followed by the U.S.

In essence, the purchase by Armajaro has made cocoa quite the hot market for the time being. In fact, demand for chocolate has remained relatively steady, despite a global economic recession. Coupled with the fact that chocolate products are just beginning to penetrate into China’s market, and it’s easy to see why cocoa speculations are soaring.

From the globalEDGE Blog

Cocoa has been used in history for over 2,000 years. Early civilizations used this delicious fruit to make early forms of chocolate and even to cure burns, cough, dry lips, fever, malaria, pregnancy, snakebites and wounds. Although none of those have been proven to work, new research has led scientists to believe that cocoa has many cardiovascular health benefits.

Click onto the globalEdge Blog to learn more about how an international team of agricultural specialists are helping rural farmers cash in on the increasing demand of cocoa.

Featured Resources

The Food and Agriculture Organization of the United Nations (FAO)
The official website of the United Nation's Food and Agriculture Organization provides a wide range of information regarding the food security issues in developing countries. In its "Knowledge Forum" and "Media Centre", readers have access to a wealth of articles and information on food security topics for different countries and regions. The website can be viewed in Arabic, Chinese, English, French, Russian, and Spanish.
Category: Security and Risk

Food Logistics
Food Logistics is a resource on logistics and supply chain management within the food and consumer packaged goods industry. This website provides a free newsletter which is published nine times a year and provides analysis and solutions to challenges in warehousing, material handling, transportation and information management. Also available are industry news, an industry calendar of events, and a directory of trade associations.
Category: Logistics

Featured Academy

Global Agricultural Trade
The Global Agriculture Trade: An Overview module contains information on the following: the reasons for the growth of trade in agricultural products and why countries want to trade globally rather than protect domestic markets; comparative and competitive advantage; how trade can benefit consumers in all countries; and the reasons behind increased global agricultural trade. An interactive game designed to teach students about global agricultural production is also included.
Category: Online Course Modules

Don't Gross Out the World
A small Macromedia Flash animation that goes through eleven questions on dining etiquette in different countries. A short but fun animation that can be used to introduce students to the topic of cultural differences. Requires Shockwave Player to run.
Category: Exercises and Simulations

globalEDGE Business Review

"The Precursors and Outcomes of Trust in the Power Unbalanced China Home Appliance Retailing Industry"
By: Yingyun Ma, Brenda Sternquist, & Ying Huang

China’s electronic retailing sector is highly concentrated with only three main retailers. This provides a unique situation for examining the determinant factors and outcomes of trust in power-unbalanced relationships. Retailer buyers from China’s home appliance retailing industry participated in this research (n=327), and answered questions about their relationship with a supplier who was more powerful and one that was less powerful. Communication effectiveness (+), opportunism(-), and conflict (-) are determinant factors leading to trust. Relationship commitment and cooperation are outcomes of mutual trust. Although power symmetry was proposed to have a moderating effect on the negative relationship between conflict and relationship commitment this was not supported.

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