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Cocoa-Commodity-Briefing-6May16 FAIRTRADE AND COcoa Around 50 million people globally depend on cocoa for their livelihoods, while governments in producing countries rely on earnings from cocoa to finance economic and social development programmes. This briefing offers an overview of the cocoa industry and explores why Fairtrade is needed, and what it can achieve. April 2016 COCOA AT A GLANCE fairtrade facts €10.8m There are 129 Fairtrade certified Fairtrade certified producer organisations 45% of Premium was cocoa producer organisations represent 179,800 farmers. In 2014 they spent on strengthening producer in 20 countries around sold 70,600 tonnes of Fairtrade cocoa, organisations (eg warehousing, the world generating €10.8m of Fairtrade Premium transport, cocoa drying facilities and tree nurseries) £306.2m 43% 43% of Premium was spent on UK sales of Fairtrade agricultural tools and inputs, training, cocoa products were worth credit services and direct payments £306.2m in 2015 (est) to farmers global facts 4m 4.5m $150BN Demand is expected to exceed 4.5 million The global chocolate Around 4 million tonnes tonnes by 2020 industry is worth $150bn2 of cocoa beans are produced each year1 Commodity briefing: Cocoa | Fairtrade Foundation April 2016 Cover: Dou Bouré Guébré, CANN, Côte d'Ivoire 2 COCOA AT A GLANCE global facts continued £4.3bN $20.3bn Cocoa exports were worth The UK chocolate $20.3bn in 20144 confectionery market was worth £4.3bn in 20143 9 COMPANIES dominate world cocoa Over 90% of the world’s processing and chocolate cocoa is grown on 5-6 million manufacture small farms5 14M CLOSE TO 50M PEOPLE 14 million rural workers directly in total depend on cocoa depend on cocoa for their livelihoods6 for their livelihoods7 6% Côte d’Ivoire and Ghana dominate world Cocoa growers receive around cocoa production but many of their 6% of the price of chocolate paid by cocoa farmers earn less than $1 a day consumers in rich countries compared and live in poverty8 with around 16% in the 1980s9 Commodity briefing: Cocoa | Fairtrade Foundation April 2016 3 1. THE ECONOMICS Cocoa is the essential raw commodity for the world’s chocolate industry, which was worth $150bn in 2014.10 Cocoa can only be produced in a belt 10° either side of the equator where the climate and conditions are suitable for growing cocoa trees. On average, four million tonnes of Cocoa is a vital source of foreign cocoa beans are produced each exchange for governments of year. Production is dominated by developing countries to invest A brief history of cocoa Côte d’Ivoire (1.5 million tonnes), in economic and social Thought to have originated in the Amazon basin, cocoa was Ghana (842,000 tonnes) and development. Cocoa is Côte introduced to Europe in the 16th century. In the late 19th Indonesia (447,000 tonnes), which d’Ivoire’s largest export, worth century the Swiss developed milk chocolate and the chocolate between them account for around $2bn in 2013, accounting for bar, and production spread to West Africa. Around 30 68 percent of the world’s output.11 17 percent of all exports. Cocoa countries now produce four million tonnes of cocoa a year is Ghana’s third most important to supply the $150bn global chocolate industry. Best known as Exports of all cocoa products – export, worth $1.4bn in 2013 and the main ingredient in chocolate, cocoa beans are processed cocoa beans, butter, paste and accounting for 11 percent of all into cocoa liquor, cocoa butter, cocoa cake and cocoa powder. powder – were worth $20.3bn exports,17 while the cocoa sector in 2014, more than double the provides a livelihood for around six value in 2005 ($8.4bn).12 million people, 30 percent of the population.18 How cocoa is grown Cocoa is an important source of The cocoa tree, Theobroma cacao, thrives where the income and employment for the Global demand for cocoa is climate is hot and humid and rainfall is ideally plentiful rural populations of developing expected to exceed 4.5 million and well-distributed. The cocoa fruit is harvested twice countries, particularly for the tonnes by 2020.19 While some a year as a main crop (October-March) and a smaller mid- five to six million small-scale predictions foresee production crop (April-September). The tree’s fruit pods contain 30-40 farmers who grow over 90 stagnating or falling, leading to a seeds which are extracted then fermented and dried, so percent of the world’s cocoa.13 global shortage of cocoa, the becoming cocoa beans. Cocoa is a delicate crop affected by A further 14 million rural workers International Cocoa Organization bad weather, while pests and diseases cause crop losses of directly depend on cocoa for (ICCO) forecast is that production 30 to 40 percent of global production.21 A cocoa tree takes their livelihoods14 and close to will broadly keep pace with around five years to produce its first beans and reaches peak 50 million people in total are demand.20 production in around 10 years. It will typically produce a large dependent on cocoa for their number of pods for a further 12 years.22 livelihoods.15 But many cocoa Additional data on the global growers, particularly in West cocoa market is available in Africa, live in poverty16 and the appendix. struggle to provide for their Making chocolate families. Several steps of processing (known as grinding) are required before cocoa can be made into chocolate. Once the beans have been roasted and shelled, the resulting nib is ground into a paste known as cocoa liquor which is then pressed to extract the cocoa butter. This also leaves a mass known as cocoa cake which is ground into fine cocoa powder mainly used in the baking and confectionery industries. Cocoa liquor and cocoa butter are blended with ingredients such as milk and sugar and processed into liquid chocolate, known as couverture, for the baking and confectionery industries or converted into bars for the consumer market. Cocoa butter is also used by cosmetic companies as an ingredient in products like soaps and moisturising creams. Commodity briefing: Cocoa | Fairtrade Foundation April 2016 4 2. THE CHALLENGES Is chocolate facing a crisis? An internet search for ‘chocolate crisis’ will throw up numerous articles predicting ‘a devastating chocolate crisis’ as ‘the world runs out of chocolate’. Behind these sometimes frivolous stories are serious issues aff ecting the livelihoods of millions of cocoa growers. With global demand growing by two percent a defi cits until 2018. But these defi cits were production practices, child labour and climate year, fears of a chocolate shortage are based cushioned by cocoa stocks held in consuming change need to be addressed before real on forecasts that demand for cocoa will countries, currently at 1.6 million tonnes, progress can be made in ensuring growing exceed 4.5 million tonnes by 2020, fuelled by and seen as suffi cient for the next fi ve years, by cocoa provides a sustainable livelihood for the emerging economies of Eastern Europe, which time production is expected to pick up.25 farmers and their communities. China, India and elsewhere. At the same time, cocoa production is likely to stagnate or fall The diffi culties in predicting the market are In recent years a number of company, industry because of the many challenges facing the illustrated by the unexpected production and government sustainability initiatives have sector – particularly the unsustainably low surplus in the 2013/14 cocoa season which been established. For example Cocoa Action, prices paid to farmers, ageing cocoa trees, saw the two leading producing countries, Côte a strategy coordinated by the World Cocoa sustained under-investment at farm level and d’Ivoire and Ghana, post record production, Federation, which states in its 2015 Progress the dwindling numbers of farmers. In 2014 with output in Côte d’Ivoire predicted to top Report that its ‘…ambition to bring together industry giants including Barry Callebaut two million tonnes in the coming years.26 the world’s leading chocolate and cocoa reiterated concerns fi rst voiced by Mars in Equally unexpected is the current 2014/15 companies represents a new level of 2012 of a one million tonne shortage of cocoa crop failure in Ghana which is predicted to see collaboration and coordination in an beans by 2020, which it attributed to output fall by more than 22 percent to 696,000 agricultural commodity to advance ‘unsustainable economic and environmental tonnes.27 This is attributed to a range of factors interventions on a non-competitive, voluntary pressures on cocoa farms’.23 including the spread of black pod fungal basis and seeks out best practices in disease and the government’s failure to promoting sustainability.’ The International Cocoa Organization (ICCO)24 supply adequate fungicides and fertilizers. is more optimistic, describing reports of a And the European Committee for threat to chocolate supplies as ‘overstated in The sector-wide objective of securing a Standardization(CEN) and the International the extreme’ and not borne out by its own long-term sustainable cocoa industry will Organization for Standardization (ISO) have set statistics. The ICCO confi rms supply defi cits in necessarily focus on improving productivity up the CEN/ISO cocoa process which aims to fi ve of the last ten years – as much as 232,000 and quality. But wider issues such as create a voluntary framework for sustainable tonnes in 2012/13 – and forecasts further remunerative farmer prices, sustainable cocoa that could help align industry eff orts and bring improved cocoa production into the mainstream. These schemes are in addition to company schemes and commitments such as Plan Ferrero’s commitment to sustainable cocoa, Mars’ Sustainable Cocoa Initiative, Mondelez’s Cocoa Life and Nestle’s Cocoa Plan.
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