Sunday, May 18, 2014

Last Call For A Bitter Cocoatastrophe

Supply shortages from growers, exponential increase in demand of emerging markets, political turmoil in Africa and global climate change affecting harvests are playing havoc with the world's chocolate numbers, and indulging your sweet tooth may soon get a lot more expensive.

Juergen Steinemann, head of Barry Callebaut, the leading supplier of cocoa and chocolate to manufacturers and food professionals, doesn't hide his concern despite the Swiss-based company's current sweet performance.

Barry Callebaut has positioned itself well to benefit from growth in emerging markets, where its sales jumped nearly a fifth last year and now account for a quarter of overall sales.

But if consumers in emerging markets quickly develop a sweet tooth for chocolate, a severe shortage of cocoa beans could develop.

At the current moment consumers in emerging markets eat just 50 grams of chocolate per person per year, compared with European and US consumers who gobble up 10 to 12 kilos per person.

Steinemann said even an increase of average annual consumption per head from 50 grams to two kilos in emerging markets would put a major strain on supplies of the cocoa beans that are the key ingredient in chocolate.

And remember, a third of the world's cocoa bean supply comes from Ivory Coast, making an exploitable bottleneck for speculators.

The average size of cocoa plantations in Ivory Coast is just two or three hectares five-seven acres), with most farmers having had little formal agricultural training and using techniques handed down to them by the parents.
"Producers can much improve their yields if they remove old bad fruit, the bad leaves with some kind of disease," said Steinemann. "It's all very simple things to do, it's gardening as you do in your garden."

Fertiliser use is currently scant and could also help in achieving the project's goal of of doubling yields from 400 to 800 kilos per hectare in Ivory Coast by 2020.

"It will be easy to get farmers to return to cocoa if we help them obtain better yields, better quality and thus better profits," said Janvier.

Barry Callebaut doesn't hold out much hope however for genetically-modified cocoa, which Steinemann said doesn't suit the taste as well as health concerns of consumers in Europe, still the biggest market.

The tight supply situation has made the cocoa market attractive for commodity speculators.

"I was very angry, but the fact is that you can't keep them out," said Steinemann.

So yes,  all indications are that cocoa is going to go up, up up.  Chocoholics, beware.

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