Ok, so normally my globalEDGE blogs are a bit more topical, serious, and germane to my international business and trade interests. But I’m finding myself up early, from jetlag, in my hotel room in Nairobi, Kenya where I am attending the joint meeting of UNCTAD and the World Investment Forum, and it strikes me that cocoa beans have been in the news lately. And the world may not have noticed!
Let’s connect the dots. Kenya is of course in Africa, and Africa accounts for 73 percent of the world’s cocoa bean production according to a 2016 report by UNCTAD (but only 19 percent of the cocoa bean roasting/grinding/refinement which is done mainly in other parts of the world, led by Europe at 39 percent). In Africa, Ghana and Cote d’Ivoire lead the way – each country has about 30 percent of their export earnings coming from the cocoa bean commodity. And therein lies the crux perhaps; that cocoa beans are viewed as a commodity.
The backdrop is that various reports from Bloomberg, CNN, BBC, and France 2 have indicated concerns that the world may be using too much cocoa, or not producing enough, and may run out of this amazing (to me as a chocolate aficionado) commodity by 2020. The general sentiment is that globally we are seeing increased demand for cocoa beans but that production is failing to respond accordingly. This would ultimately result in much higher prices, perhaps even cocoa beans not being viewed as a commodity, and limited access to the raw product.
This raw product – cocoa beans – is now used in a plethora of food and non-food products. Historically, the word "cocoa" comes from the Spanish word cacao, which is derived from the Nahuatl word cacahuatl. The history is a bit longer than that and the traces of cocoa is longer as a result, but the bottom line is that there is a Spanish, Latin American heritage to cocoa beans. The most logical, and agreed on, view is that the Olmecs (1500-400 BC) began cultivating cocoa in equatorial Mexico, with the Mayans (600 BC) and Aztecs (400 BC) also developing successful processing methods for cocoa beans as well.
Today, Africa is the focus. The starting point in the cocoa global value chain is a large number of small agricultural farmers (cocoa comes from about 90 percent small farmers and not big companies) – mainly in Africa (73 percent) but also some in Asia/Oceania (11 percent) and in the Americas (16 percent). The cocoa value chain then takes us through sourcing, processing, manufacturing, distributing, and retailing. And, value is added at each step.
But, the monetary value coming back to the small local growers in Africa is not enough to scale to what the world needs by 2020. However, proudly, I can share that Michigan State University has long been doing outreach in Africa to connect farmers with markets worldwide, and hopefully we are a part of the solution in some way to a potential cocoa bean shortage! I’m certain the world can’t handle a shortage of chocolate and of course cocoa bean production, roasting, grinding, and refinement have to be solved in the process of making chocolate, certainly before 2020.