Cocoa Production

Yasmeen Koufahi Student number: 999287301 April 10th, 2012

Yasmeen Koufahi 999287301

2012

Cocoa as a commodity is one of the greatest industries in the world. Ever since this precious fruit was discovered by the Spanish during their conquest on the Americas, its consumption and production growth has grown rapidly over the past few centuries. Cocoa is responsible for a close relationship between Europe and Africa, as Europe is a substantial consumer and producer of chocolate and Africa is of the greatest producers of cocoa, a main ingredient of chocolate. This paper explores the ties between Europe and West Africa linked to the production and consumption of cocoa, in addition to the analysis of the effects of cocoa production in economic, political, and social terms. There will be two views tackled in this paper, which include a mainstream media view and a social impact (non-capitalist) view of cocoa production, which involve a historical analysis of cocoa, a recent and global assessment, and the costs of growth in the cocoa industry. History of Cocoa as a Commodity Cocoa was first used by the Olmecs in South America as a drink combined with luxury spices, which then spread to Central America where the Mayans and Aztecs had lived. "Columbus was the first European to encounter cocoa while on a canoe in 1502" (Munjuga). However, the bean's potential was truly "recognized by Hernando Cortez while he was on his conquest in the Americas, who then brought it back to Europe in 1528" (Munjuga). The Spanish tried to keep the precious cocoa beans for a while, up until the 17th century when cocoa became a trade commodity throughout the whole of Europe. Cocoa beverages were first adopted by the French court, and then England followed along with Italy and the rest of Europe. However, cocoa was first only reserved for the upper class as a treat. The industrial era greatly contributed to the widespread of cocoa impacting everyone from cocoa harvesters to the consumers. "As Europeans began to profoundly colonize
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Yasmeen Koufahi 999287301

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Africa, they brought the cocoa tree along with them in which they productively planted in Sao Tome, which spread to the rest of Africa" (Munjuga). This has led to Africa being one of the largest producers of cocoa starting the 20th century. Cocoa in Mainstream Nowadays, West Africa produces over 60% of the world's cocoa. "The largest producer of cocoa would be Cte d'Ivoire which obtains 20% of its revenues just from the production of cocoa, however global sales amount to $75 billion per year and farmers only get paid a small portion of $4 billion out of the total revenues" (The Economist). Ghana, the second largest producer of cocoa in Africa has Kuapa Kokoo, a cooperative with more than 45,000 African farmers that owns 45% of British chocolate company Devine. Devine claims that the majority of its shares belong to African farmers, which makes the farmers happy that they own something outside of Ghana. Devine also claims that the cocoa that comes from Ghana is all on fair trade terms. On the other hand, companies like Cadbury face disputes among fairness to farmers. "Ghana produces all of the British company Cadbury's cocoa, and there have been studies showing that the average production of a cocoa farmer has dropped to 40% of potential yield, and that farmer's children do not want to work on cocoa farms anymore" (The Economist). Therefore, now chocolate companies are trying to set agreements based on fair trade in order to increase their productivity in West Africa. "However, what also puts off farmers are the high taxes that accompany cocoa farming, which estimate that 40% of the international price of cocoa goes to the government" (The Economist).

Yasmeen Koufahi 999287301

2012

As the production and prices of cocoa have risen during the past few years, many other countries have taken interest in the production of cocoa including Indonesia, and Nigeria Columbia. In the past ten years, Indonesia and Nigeria's production has increased due to hybrid seeds in which the government supports. Also, Columbia has made plans to begin production in cocoa due to the increase in potential with this commodity. Ever since the 18th century when cocoa began to be traded between nations extensively, future contracts were formed between cocoa producing countries such as in West Africa and European countries. These were formed in order to insure that prices of cocoa would not rise due to political instability or natural disasters. However, recently many European countries have complained due to "violation of the contracts which have raised cocoa prices up to a thirty year record of 2,590 per ton" (Moya). The financial institutions and funds control up to 30% of future contracts, and the price alterations they cause change investment plans for producing countries. FairTrade Foundations claims that it is unfair for traders in developed countries to make huge amounts of money, while small farmers producing the commodity make even less than the cost of producing cocoa. "Investment Banks, such as Barclays, Goldman Sachs and JP Morgan, have relied on commodity revenues as one of the drivers of recent profits, given the slowdown in credit and equity market"(Moya). Due to this, cocoa farmers face the burden of not having enough to cover costs even with the increased price of cocoa, while investment banks benefit the most by having the majority of the revenues as profit. The only solution to this issue would be for FairTrade agreements to enforce human rights on small cocoa farmers, just as the company Devine, which has a lot invested by charities, and in which the majority of its shares owned by small farmers.

Yasmeen Koufahi 999287301

2012

In 2008, there has been a crisis regarding political unrest because of presidential elections in Ivory Coast, thus this has impacted the rise in prices of cocoa as Ivory Coast is the largest producer of Cocoa. Although this is was a disruption for Ivory Coast's leading title for being the largest producer of cocoa, the political disputes in Ivory Coast were actually an advantage for other cocoa producing countries. During that time, "officials of Ghana pondered ways in order to gain Ivory Coast's title of being the largest producer of cocoa" (Ntaryike). However, as soon as the issue was resolved, Ivory Coast remained as the largest producer of cocoa. Alternative View: According to trends from the past and relationships between Europe and West Africa, cocoa is becoming a widely invested in commodity. Every year, consumption of cocoa rises along with population growth, and firms as well as great financial and investment institutions have capitalized cocoa production significantly. Conversely, cocoa is a scarce resource, yet demand continues to rise every year. "In China and India, demand for cocoa has been increasing by around 15-20% annually" (Geoff). In terms of supply, cocoa production has been stuck by weather conditions, such as increased perspiration which causes beans to rot. Also, cocoa is at risk for harmful diseases, for instance the black pod which has slowed down cocoa yields for the past 15 years. Cocoa production, specifically in Ivory Coast is in danger of decreasing every year. According to Scottish Newspaper, Herald Ivorian cocoa trees, planted more than 25 years ago, have already passed their peak of productivity and, without new planting, production in the country is likely to drop every year, tightening the global market as demand rebounds (Nurhayati). Child labour is another issue which is critically granted imposed on cocoa farms. Children are frequently forced to work on cocoa farms as part of the family "tradition", to help
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increase yield of production. On cocoa farms, children use dangerous tools, and are restricted from their education due to profit oriented firms pushing the production of cocoa to its fullest potential. However, due to a rise in corporate social responsibility awareness, and in attempt to avoid government regulation, "firms claim their chocolate products are 'child labour free'" (Labour Rights). In efforts to decrease child labour and create a more sustainable environment, the governments of West African countries Ivory Coast and Ghana have played roles in forming national plans in order to address this delinquent. The governments declare that workshops have been implemented in order to solve the issue of child labor, and create laws and regulations within labour enforcement. However, during the past years, little effort has been applied to solve this issue. In addition to child labour, cocoa farmers face labour exploitation and violation of human rights. Another concern in the production of cocoa in West Africa is that even though West Africa has the largest land for cocoa farms in the world, and is known for producing highest quality cocoa, there are environmental costs. Cocoa production has led to the destruction of many forests in West Africa. In addition, the long process of treating cocoa beans all the way from pre-cleaning to roasting creates environmental waste, and produces greenhouse gasses into the atmosphere which contributes to global warming. Conflict between costs and prices is another obstacle faced with cocoa production. On one hand cocoa prices are rising because of limited supply, and on the other the hand, West African governments blame companies and financial institutions for child labour because they keep prices too low. Yet at the same time, firms claim the prices are too high because of fair trade agreements which are trying to demolish child labour and exploitation.
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Yasmeen Koufahi 999287301

2012

In my opinion, this analysis is different from the information available in the popular media because it takes on another point of view, the social cost of cocoa production. In the popular media, cocoa production is presented in such a way that is concerned with yield productivity, generating revenues, rise or decline in prices, investments in cocoa, and so forth. However, on the other hand, the other view is about the social costs of cocoa production on farms, which include child labor and the minimal efforts to regulate it, exploitation of labor slave labor, as well as environmental costs of deforestation and processing. There is much conflict on both sides with prices and costs for cocoa production, yet each side has a different argument. There are two different arguments on the prices of cocoa, one is with popular media which agues prices are getting too high due European financial institutions invading the commodity market and investing heavily in cocoa, and the other supports the farmers' take claiming that prices are rising due to bad weather, and yet still prices are not high enough which is causing the use of child labour and not being able to cover costs. In summary, cocoa went from being used as an exquisite drink by the early South Americans to being a highly industrialized product in Europe expanding to the rest of the world. From the point in time to when it was first discovered by the Spanish and brought to Europe in the 16th century, to then being planted in Africa, and to now having West Africa the largest producer of cocoa in the world cocoa is now one of the major growing industries in the world. However, cocoa like most commodities faces problems with child labour, human rights, scarcity, and prices issues. Two arguments about cocoa as a commodity are debated between the European corporation side and the social and environmental side. The first argues prices are too high and the other argues prices are low due to challenges causing the use of child labour and violation of human rights.
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Yasmeen Koufahi 999287301

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Bibliography "Cocoa Campaign." International Labor Rights Forum. 01 Jan. 2009. Web. 22 Mar. 2012. <http://www.laborrights.org/stop-child-labor/cocoa-campaign>. Geoff, Riley. "Cocoa Economics." Tutor2u. Tutor2u, 30 July 2010. Web. 24 Mar. 2012. Moya, Elena. "European Cocoa Traders Allege Market Abuse on Commodities Futures Exchange." The Guardian. Guardian News and Media, 06 July 2010. Web. 22 Mar. 2012. Munjuga, Moses. "History of Cocoa." World Agroforestry Centre. INAFORESTA. Web. 22 Mar. 2012. Ntaryike, Divine Jr. "Cocoa Growers Profit from Ivorian Crisis." Voice of America. VOANews, 04 Apr. 2007. Web. 22 Mar. 2012. Nurhayati, Desy. "Cocoa Production May Fall 20% Due to Bad Weather." The Jakarta Post. The Jakarta Post - PT Bina Media Tenggara, 07 Aug. 2011. Web. 24 Mar. 2012. "Sweet Dreams." The Economist. The Economist Newspaper, 05 Aug. 2010. Web. 22 Mar. 2012. "Thinking out of the Box." The Economist. The Economist Newspaper, 04 Apr. 2007. Web. 22 Mar. 2012

Yasmeen Koufahi 999287301

2012

(Image from International Labour Rights)