Bittersweet Futures

BittersweetFutures

The Chocolate British Shorthair is one of the most beautiful members from the family of classic British cat breeds, gifted with luxurious fur of deep chocolate hue. A perfect name for a perfect cat. However, what if future generations fail to appreciate this perfection due to the word ‘chocolate’ becoming an unknown name for a forgotten treat from sweeter times, long since passed. This may be the consequential reality resulting from industrial reforms being proposed in Western Africa today, where collaboration between governments and cocoa producers may see the global price of chocolate rise to melting point and thus vanish of the pantries of the common public.

Cocoa began life with a hallowed existence in Southern America, serving a monetary function for native civilisations and enjoyed as a drink within the gilded cups of Mesoamerican royalty. Its status as an aristocratic beverage continued when its first export of the beans gained great popularity amongst the upper echelons of European society, those being the people that could afford the drink once cost of labour and once the shipping and handling were factored into the final price. The notoriety and popularity of cocoa grew so great that it fostered the creation of an enormous slave plantations for the crop within Southern America until such high demand eventually prompted the cocoa industry to transfer production to Western Africa.

This move triggered a monumental drop in the price of cocoa which resulted in an equally great drop in the price of chocolate, opening so many more consumer markets on the European continent. Drinks, bars and ice-cream flavoured its wonderful flavour have continued to be enjoyed by all for over a century. The thought of cocoa-derived products continuing to be a staple of our diet and a regular of our beauty routines seems an immovable certainty, but these assumptions can be considered unbelievably optimistic when one considers the plans from the two main cocoaproducing nations, Ghana and the Ivory Coast, for cocoa production today and the consequences these plans may have for us chocolate-lovers tomorrow.

The affordability of such luxurious and delicious produce is wonderful for us as consumers but creates a horrendous existence for its producers who exist in a cycle of harsh toil for paltry reward. This is due to the skewed dynamic between price and pay which in the farms operating with extremely thin margins and, revealed at the 2018 Paris Agricultural Show, industry profit is swallowed up by processers and distributers, with only 6% of total earnings returning to cocoa growing nations and only 2% of that sum reaching the individual growers themselves. Not only are the people involved in the agricultural side of the cocoa industry poorly paid and profit shared so unequally, but they are also at the mercy of everchanging global markets, with financial constraints have being especially heavy following cocoas 2008 price stagnation and its price collapse in 2015, further reducing their ability to command a higher price for harvests.

Therefore, it is understandable that this misery has produced considerable unrest with those involved and that they are requesting assistance from their governments. To pacify this discontent, Ghana and the Ivory coast have created proposals to exert some control on the global price of the crop. This is to be achieved through the introduction of a ‘Living Income Differential’, a $400 premium applied to every tonne of harvested, raw cocoa on top of the typically commanded price.

A $400 price increase may appear unreasonable, however, the reasoning behind the decision is that both countries producing such a large stake of cocoas total production that could allow them to dictate the price and change an heighten the industry’s standard price. Ghana is in possession of nineteen percent of the total global supply of cocoa with the Ivory Coast possessing forty-three percent. Overall, two thirds of the total world production of cocoa occurs within Western Africa alone.

This near-monopoly is not purely the result of history but also the temperamental nature of the cocoa plants growing conditions. For the trees to reach fruit-bearing maturity, it must be located in the narrow strip no further than 11 degrees from the Earth’s equator, being immersed in continual humidity, the perpetual downpours of a rainforest climate only broken by a short dry season and warmed by a temperature between twenty-one and twenty-three Celsius. From these impossibly strict conditions, very few countries possess land capable of industrial-scale cocoa groves and this natural exclusion shows, with the collected world production consisting only as five million farms, each being on average less than ten hectares in total size. Following this information, it is easy to understand the rational of both governments; they are almost the sole possessors of a suitable climate for production, which theoretically should allow them to abuse this fortunate position and extort global buyers into purchasing a product with an artificially higher price, as there are very few options consumers can choose from. The consumer, in theory, must purchase cocoa from them.

Reporters, Isis Almeidaand and Ekow Dontoh, of Bloomberg, are highly negative of this national pursuit, stating that such a policy will lead to a boom and bust economy of unintended consequences, with great surplus preceding great price falls- the very opposite of the secure, regular increasing price.

However, this promise of $400 will be an undeniable offering to the desperate people who, for years, have subsisted upon the miniscule pay from the lowest prices of cocoa in recent history and will immediately resolve to plant a greater number in its pursuit. This overplanting will lead to a great surplus during a time of reduced global market consumption, a consequence of the premium which causes cocoa-purchasing companies to push the $400 cost onto the individual consumer which materialises as raising the price of the products they buy. A certain percentage of these people, realising that the standard price of a chocolate bar or chocolate drink has risen and that they can no longer afford the quantity they could before, and will buy less cocoa-derived products or cease consumption of them entirely. These actions convert into the reduction of consumer demand.

Why would one gaze into a crystal ball for the ending when we could simply read from the pages of history? Nations have always struggled to control the prices of their citizens goods. It has been theorized that Ghana and the Ivory Coast are attempting to replicate the Organization of the Petroleum Exporting Countries, OPEC. This is the arrangement between 14 of the world's major oil-exporting nations, who operate as a cartel

The premium policy may have been influenced by conclusions met from previous failed attempts at supply control by the Ivory Coast. The 1980s was a decade marked by unfortunate chance for Ivorians, beginning with the downturn in global prices of cocoa, severe drought withering almost a quarter of a million hectares of cocoa plantations and the collapse of discussions concerning price agreement with the cocoa industry, culminating in with the world recession of 1986 and the financial crisis that subsequently set upon the Ivory Coast. In the fallout of these recurrent, almost biblical, curses of bad luck, then Ivorian President, Félix Houphouët-Boigny, ceased the export of cocoa as a final effort to raise the price of harvests. This effort was futile, with the price of cocoa halving in two years as consequence of oversupply and under-demand for the crop.

Despite those turbulent times, Western Africa still retained a large stake in the global cocoa supply. However, the 1980s are almost forty years in the past, with the industrial arrangement and agricultural landscape changing so much in the passing years, that if the cocoa industry of Ivory Coast collapses again and Ghana’s falls alongside, both may fail to recover their positions as the dominant cocoa-powers. The development of the emerging cocoa-growers may eclipse Ghana and Ivory Coast if they were to stumble in the economy of the present, being unhampered by the premiums that the Western African nations will have imposed upon themselves. The absence of such premiums will allow the price of their cocoa to reflect its true value, having great appeal to the trader and buyer markets in comparison to the now overtly overpriced Ivorian and Ghanaian cocoa. The Living Income Differential intended to improve the lives of cocoa farmers in Ghana and Ivory Coast will collapse following the natural transfer of buyers purchasing the crop from Ghana and Ivory Coast to these emerging, premium-free nations.

One of these nations is Indonesia, ideally placed along the earth’s equator with the correct soil and climate wherein the cocoa trees can grow with strength and vigour. These conditions have been utilised well for the past 25 years, with 1.5 million hectares of land terraformed into cocoa groves and their fruit becoming the archipelagos fourth-largest earning agricultural produce for foreign export, all allowing Indonesia to become the primary non-African competitor in the cocoa industry. In 2009, despite the era of price stagnation, 250,000 tonnes of cocoa was produced which almost doubled to 480,000 tonnes in 2012.

The World Cocoa Foundation reported that the annual global demand for cocoa has been reliably increasingly for the previous century and I doubt it will change. This enormous and forever-growing crowd of sweet-toothed people will just be in search of new suppliers when the Living Income Differential is enacted. Indonesia is in a perfect position to harbour these lost buyers and proliferate trade of crop due to their competitive advantage of price and may possess the opportunity to carry the mantle as the main producer of cocoa if disaster does strike and Ghana and the Ivory Coast fares for the worst.

Perhaps then, our future, as a world of chocolate-lovers, is not so bittersweet. Instead of artificially-induced price inflation and chocolate returning to its exalted status for the few, another country will simply step in and continue to secure both our sweet-tooth and our beloved Chocolate British-Shorthairs comparison with the delicious treat we all know and love.

Composed by,

Maurice Alexander, Undergraduate of Business Management