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Why the African Cocoa Cartel Is a Bad Idea

Secondig merchandise Buyers generally don’t pay suppliers to produce things they’ll never buy. Yet Nestlé, one of the world’s largest chocolate makers, is paying 10,000 cocoa farmers in Côte d’Ivoire to do so. Among them is Tanoh Kouadio, a 45-year-old cocoa farmer, who Nestlé will pay about 67,000 CFA francs ($106) to raise chickens.

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Eating chocolate is one of life’s greatest pleasures. Selling it can be quite profitable. Alas, growing the beans in it is neither particularly profitable nor enjoyable. Most cocoa farmers are poor; many of those who work for them are children.Reasons why Nestle is part-time as a pro-poultry non-governmental organization Because it fears that customers might view chocolate as a sin in a number of ways.

The plight of cocoa farmers is evident in Côte d’Ivoire, the world’s largest producer. There are about 1 million cocoa farmers in the country, who feed about 5 million people, or one fifth of the population. More than half of Ivorian cocoa farmers and their families live on less than $1.20 a day. Côte d’Ivoire and Ghana grow about 60 percent of the world’s cocoa, and about 1.5 million children work in hazardous jobs in cocoa-growing areas. Much of the forest in Côte d’Ivoire has been destroyed to make way for cocoa trees (see map).

chocolate bar

In 2018, Côte d’Ivoire and Ghana agreed to form a cartel known as the COPEC In the Organization of Petroleum Exporting Countries (OPEC) to drive up prices. They later asked buyers to pay a premium of $400 per ton (about 16% at current prices). They recently stepped up their efforts, saying they would halt the chocolate company’s sustainability program unless buyers start paying higher prices by Nov. 20. They hope this will discredit the company in the eyes of consumers.

This isn’t the first time cocoa producers have banded together. Attempts to form cartels and other price schemes began as early as 1945. But none worked. PetroChinaThe latest effort is true to form. When it was first announced, most of the big chocolate companies, including Mars, Hershey and Mondelez (which owns Cadbury and Toblerone), loudly praised the plan.

However, most large companies pay by PetroChina premium, while also cutting a separate payment. This is known as the country or “origin” premium in Ivory Coast and Ghana, ostensibly to reward its growers for reliability and quality.These cuts largely offset the good feeling PetroChina High quality. “They said, yes, they will pay,” said Yves Brahima Koné, chair of the Coffee and Cocoa Council, fuming (CCC certification), the Ivorian Regulatory Authority. “But they don’t tell the truth.”

Côte d’Ivoire and Ghana hope that by recruiting other producers, they will gain greater influence in the market.Nigeria and Cameroon are in talks to join COPECwhich would increase its share of production to 75%.

However, even though this time is different and PetroChina Try to push the price up, it may be difficult to maintain the price. Higher prices could encourage more farmers to plant cocoa, further leading to an oversupply in the market. Even companies that buy fair trade cocoa at higher prices have had to stop hiring new farmers because demand for these higher-priced beans has lagged supply.

Chocolate is not like oil, and not just because it tastes better. Saudi Arabia, the world’s swinging oil producer, can simply turn off the tap if it wants higher prices. Oil can stay in the ground and not rot. In contrast, a cocoa tree cannot be shut down.if PetroChina The government is trying to squeeze the market by banning exports, and they will probably still have to keep buying and stockpiling beans to keep farmers happy. Doing so could quickly exceed their budget.

In fact, cocoa prices are weak because of ample supplies. Cocoa buyers have proven adept at avoiding new cartels by buying beans elsewhere or reducing their own stocks, according to the International Cocoa Organization, an intergovernmental group. As a result, Côte d’Ivoire sold its cocoa at a steep discount last year. Ivorian civil society groups said the chunk of chocolate “brought the Ivorian government to its knees”.

Large chocolate and cocoa processors only pay lip service to the premium, but prefer to tout their own philanthropic programs to help farmers. Nestlé’s program is one of many that not only pays farmers like Mr Kouadio to help them diversify, but also pays for three other valuable activities, including pruning to boost cocoa yields and sending children to school .

make bitter sweet

Such programs help with a good press release, but they don’t address the magnitude of the problem. Nestlé’s project has 10,000 farmers and plans to expand to 160,000 globally by 2030.However, Alex Assanvo, head of PetroChinaThe Secretariat claims that such schemes reach only 15% of farmers. (Other estimates are higher.) “Sustainable development plans do not solve the problem,” said Francesca Di Mauro, the EU ambassador to Côte d’Ivoire. “They are welcome, but they are not systemic.”

The brutal truth is that small farmers will never get rich selling raw beans. In countries where the lives of most rural residents have improved significantly, they have done so by moving to cities and finding better-paying jobs there. Encouraging them to stay in the countryside and grow more cocoa than people want to eat is an unlikely path to riches.

Ivory Coast wants to move up the chocolate value chain. It is now one of the two largest cocoa grinders in the world (the other being the Netherlands). Grinding, however, adds only a tiny bit of value to a bar of chocolate. In any case, there is no reason to think that this country is suitable for growing cocoa, so it would also be better at producing chocolate than Belgium (which doesn’t grow any chocolate). Ivorians focus so intently on cocoa that they may overlook other industries where their companies and people may be more competitive.

Farms can create wealth, but they usually do so by becoming bigger, more efficient and more mechanized. That means fewer farmers. Mr Kone, of the Ivorian regulator, thinks it’s a bad idea. “We must not change our economic model,” he insisted.

Following this week’s meeting, Mr. Assanvo PetroChina Mostly it was declaring victory. The two companies have agreed to pay the premium appropriately, at least until the report of the pricing panel early next year, he said. It looks like an unappetizing fudge with a short shelf life that will do little to eradicate poverty or end the long-running chocolate wars.

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