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June 13, 2010

Cocoa yields decline in Ivory Coast

by Javier Blas

People used to call Abidjan the Manhattan of West Africa. It was the 1960s, and the commercial capital of Ivory Coast was alive with possibility. No longer a French colony, the country had a booming cocoa industry whose profits coursed through Abidjan.

“Cocoa francs” laid the boulevards of the upmarket Cocody neighbourhood and built the skyscrapers in the business district of Le Plateau. Famous singers and actors flew in from Paris. The city’s casinos brimmed and bubbled. The nation became a byword for stability and prosperity in west Africa, while the world ate more and more chocolate. As the 1960s became the 1970s and then the 1980s, cocoa remained to Ivory Coast what oil was to Saudi Arabia or Nigeria: a geyser of cash. Brown gold.

The French brought cocoa to Ivory Coast, but it was Félix Houphouët-Boigny, the country’s first president (and a former cocoa planter), who masterminded the development of a multi-billion-dollar national crop that could meet strong demand for chocolate in Europe and the US. Not that the plants needed much encouragement. Cocoa is from Latin America but in Ivory Coast it found a land in which to prosper: deep and fertile soil, ample rainfall throughout the year and the shade of taller trees. The ideal growing conditions of equatorial west Africa mean that Ivory Coast and neigh­bouring Ghana, Nigeria and Cameroon now supply almost 70 per cent of the world’s cocoa. Indonesia and Brazil account for much of the rest.

Houphouët-Boigny ruled for 33 years and he ensured the growth of the Ivorian cocoa trade in the 1970s and 1980s with a mixture of subsidies and land incentives, conferring property rights on whoever planted cocoa. The ­policy attracted immigrants, ­particularly from Burkina Faso and Mali, who further expanded production. By 1977, Ivory Coast had overtaken Ghana as the world’s largest cocoa producer and tied its future inextricably to the future of the global chocolate industry.

Today, about 800,000 Ivorian farmers produce almost 40 per cent of the world’s 3.5 million-tonne cocoa crop. The country’s output of 1.3 million tonnes is more than double what it was in the 1980s and 26 times the size of its harvest in 1960.

But Ivory Coast’s importance in the cocoa market, and its decades of increasing production, mask a bleak ­reality and an uncertain future. After half a century of almost uninterrupted expansion, the Ivorian cocoa machine has begun to falter: cocoa yields are down and so is their quality. Cocoa trees are getting old and sick, and a byzantine world of smallholder farmers, corrupt politicians and travelling middlemen is resistant to change. The multinational food ­companies that depend on a reliable, cheap supply of the commodity are worried. It is early days, but the publicity-shy cocoa industry has started talking about a “chocolate crisis.”

I am driving down a muddy road on my way to visit some cocoa farms in upcountry Ivory Coast, about 250km north of Abidjan. After the death of Houphouët-Boigny in 1993, Ivory Coast slowly spiralled into civil war and although the fighting ended in 2004, the country remains divided between the south and the rebel north. Elections have been delayed six times since 2005, and the political deadlock has done nothing to help the country’s most important crop.

I am with Hans Jöhr, head of agriculture at Nestlé, the world’s largest food company, and he is explaining the scale of the problem that has now grown in the vacuum. “Cocoa is in danger in Ivory Coast,” he says, spelling out the normally unspoken fear of many ­in the chocolate industry.

Dishevelled in the heat, but apparently tireless, Jöhr does not come across as an everyday executive. “I am a farmer,” he says, describing his childhood in rural Switzerland and then the search – first in Canada, next in Brazil – for new and larger farms, where he grew everything from soyabeans to coffee. In between, Jöhr, who is now 55, found time to study agricultural economics and earn a PhD, but as we go from village to village and I watch him talk in a rapid French to cocoa growers, asking them to break open their cocoa pods and tell him what fertiliser they use, it is clear he remains connected to the soil.

Jöhr’s job is to keep Nestlé supplied with agricultural commodities – a mammoth undertaking considering that a 5 per cent increase in sales of the company’s breakfast cereals requires the equivalent of Switzerland’s annual cereal crop. Jöhr has a team of 950 agronomists and veterinarians to help him – more than many state-run ­agriculture organisations – and cocoa is high on his list of concerns.

“If we want to grow our chocolate business, we need to make sure that the supply is there in the future,” says Jöhr. He explains that the main issue for a company relying on a commodity such as cocoa is not just its price but also that it is available in the first place. His worst nightmare is not that Nestlé’s chocolate sales are hurt by expensive cocoa, but that there is not enough good cocoa to buy.

He is not alone. Almost all the world’s largest chocolate companies have expressed concerns about the quality of Ivory Coast’s cocoa supplies as well as their cost. “There is nearly a panic reaction,” a senior European cocoa trader in Abidjan tells me a few days later.

With such a large proportion of the global crop, what happens in Ivory Coast affects the world. The country’s harvest has fallen more than 15 per cent during the past five years, causing the most severe shortages on the cocoa market for four decades and sending prices to their highest levels for more than 30 years. Cocoa grinding, a proxy for chocolate consumption, has now run above supply for four years in a row, the worst run since the late 1960s.

The only reason prices are not even higher, according to cocoa traders, is the economic crisis, which has cut demand in developing countries where chocolate remains a luxury. But as global consumption picks up again, the industry worries that prices could rise well beyond their current level of about £2,400 ($3,400) a tonne, approaching the record price of £3,000 a tonne which was set in 1977 when west Africa experienced severe droughts. And, it seems, worse could be yet to come. With another disappointing crop expected later this year, traders believe that 2010-11 will be the fifth consecutive year in which cocoa supply has fallen short of demand. That has not happened since records began more than 50 years ago.

Resolving the cocoa crisis is not going to be easy, however, partly because of the unusual structure of the industry. Unlike almost every other major agricultural commodity – corn, ­coffee, palm oil, sugar – the world’s cocoa is still grown overwhelmingly by smallholders, each owning less than four ­hectares of land. The task of increasing production does not lie with the managers of big agribusiness plantations, but in the individual actions of thousands of mainly poor west ­African farmers.

Tietiekon Amankro is the sort of place where Ivorian cocoa grows. The village – no more than a few buildings at the end of a muddy track – is almost unreachable during the rainy season, and is the Africa of stereotype. Houses are made of mudbrick and dry palm leaves, and children run barefoot and smiling. There is no electricity or running water.

It is as far away from foil-wrapped Swiss chocolates as one can imagine. But whatever the hardships, life in a cocoa ­village in Ivory Coast is still far better than the chronic hunger of the countries to the north – Burkina Faso, Niger and Mali – from which immigrants came in their tens of thousands in the 1980s. In a good year, a cocoa farmer in Ivory Coast with five hectares of land will harvest about 2.5 tonnes of cocoa beans, earning about €3,000 (£2,500).

The cocoa grows in among the forest on the edge of the village. A foreigner would not realise he is strolling into farmland were it not for the grower’s warning. The monumental arms of rainforest trees filter the light from above, allowing only a dim luminosity to spread among a colourful chaos of crops. There are cocoa trees, rubber trees, avocado, papaya and orange trees. Coffee bushes fill in the gaps. It is textbook smallholder farming in west Africa: a mess of ­different crops beneath the forest canopy.

The abundance belies the struggle that cocoa production has become. In Tietiekon Amankro, farmers tell me about the problems threatening an enterprise whose intensive, manual methods are largely unchanged since it was introduced to Ivory Coast at the turn of the last century.

“We have old trees … The production does not increase,” says Betran Ejao, a 35-year-old cocoa farmer, as we walk towards the farms. He shows me a tree that was planted 25 or 30 years ago – in the midst of the Houphouët-Boigny years – and yields less and less every year. Like elderly humans, old trees are more fragile and prone to disease.

Ejao explains that the farmers of Tietiekon Amankro are now losing about 10 per cent of their crop due to black pod disease, a fungus that attacks the cocoa fruit and has disrupted harvests around the world since the 1920s.Throughout the villages around Tietiekon Amankro and Gagnoa, the nearest large town, and Yamoussoukro, Ivory Coast’s capital, I hear similar complaints from ­farmers. Without support from the country’s absent politicians, they are now appealing directly to the international chocolate industry, non-governmental organisations and the World Bank to help them boost production with higher-yielding cocoa trees, ­subsidised fertiliser and cheap pesticides.

Even then, some problems can only be tackled closer to home. An inefficient and corrupt price-fixing system that lasted until the late 1990s has given way to a free but disorderly Ivorian trade, and farmers have been further aggrieved by a series of tax increases. About 40 per cent of the international price of Ivorian cocoa now finds its way into the ­government’s ­coffers, a levy that has left growers at a disadvantage to rivals across west Africa and prompted many to abandon the crop altogether. By uprooting their trees and planting rubber, which requires less work both in cultivation and harvesting, they can reap the benefits of another lucrative commodity – now ­enjoying its highest prices ever – but without the bribes and the taxes.

Ageing trees, poor governance and easier profits elsewhere have all conspired to slow the Ivorian cocoa machine, with the result that the country’s farmers are now being outperformed across the world. The average yield of 500kg of cocoa beans per hectare in Ivory Coast has been overtaken by almost every other producing nation and is just a third of what farmers harvest per hectare in Indonesia, the world’s third-largest producer.

So what can be done to increase production? Chocolate companies believe that the answer lies in the trees; specifically, in replanting Ivory Coast’s failing plots with new, higher yielding stock that can resist pests. It is a colossal task: Ivory Coast has about 2 billion cocoa trees and almost all the work must be done by the private sector. Nestlé, which has the most advanced plans, aims to spend about SFr110m (£67m) replanting 12 million trees over the next decade, which would equate to just 0.6 per cent of the total.

Not a quick fix then, but the “Cocoa Plan” is a start, and it has captured the imagination of farmers seeking to reinvigorate their holdings. The new plantlets, which will be ­distributed at a rate of one million a year from 2012, have already been nicknamed “Mercedes” for their supposedly upmarket quality. “They grow very, very quickly,” says Jebouet Kouassi, a 43-year-old who runs one of Nestlé’s nurseries in Ivory Coast.

Kouassi is showing me ordered ranks of young cocoa plants, all about 2ft tall with unblemished green leaves. In a country where almost every cocoa tree suffers from yellowed leaves and some form of infestation, the immaculate plantlets look odd: alien life-forms from an agronomic laboratory, transplanted into one of the world’s poorest farming communities.

The “Mercedes” are the result of years of breeding cocoa trees, using non-GM methods, and blending them with Ivorian varieties to make them more resistant to local diseases, including the devastating black pod. “They can produce in about 18 months. The others take at least three years,” says Kouassi. When I ask him if he believes that the new trees will improve Ivorian yields, he smiles and says: “Oh, I think they will produce 3 tonnes [per hectare],” six times the ­current yield.

As important as increasing production, however, is arresting the slide in the quality of Ivorian cocoa. Seeking a balance between flavour and quantity has been the delicate task of cocoa growers for the past two millennia, and many of the ­dilemmas facing Ivory Coast’s farmers date from the pre-Colombian civilisations of America and the ancient arts of growing, ­harvesting, fermenting and drying the cocoa bean.

The world’s cocoa originated in the upper Amazon, from where it was brought to Mexico by the Olmec civilisation, which ­flourished between 1500 and 400BC. The first European contact with the bean came at the court of Montezuma, the Aztec ruler, where Hernán Cortés, the Spanish conquistador, tasted a bitter cocoa drink called xocolatl in 1519. The ­conquistadores took cocoa back to Spain, where European botanists gave it the name Theobroma cacao, joining the Aztec word cacahuatl with the ancient Greek theobroma, “the food of the gods.”

The original cocoa drunk by Cortés and Montezuma was what is now known as the Criollo variety, a premium strain grown mainly in central America that accounts for less than 1 per cent of the world’s cocoa because it is so difficult to cultivate. Nowadays, about 90 per cent of cocoa – and almost all that is grown in west Africa – is of the Forastero variety, a much hardier and disease-resistant bean first grown on ­Spanish plantations in the Caribbean. Chocolate companies and cocoa farmers are forever searching for a blend of ­varieties – such as the Trinitario, a mixture of the Criollo and the ­Forastero – that gives them the optimum combination of ­flavoursome cocoa, high yields and healthy trees.

But even then, much of the eventual quality of the cocoa is decided during the fermentation and drying of the bean, a ­process that Montezuma would still recognise. In Ivory Coast, I watched farmers pick the pods, each half the size of a watermelon, and open them by hitting them four or five times with a thick wooden stick. As the pods crack, the farmer extracts the mellow, white beans that are yet to turn their ­characteristic brown. Each pod produces between 25 and 30 beans, which the farmers heap in their thousands in clearings in the forest, before wrapping them in banana palm leaves to ferment. ­Fermentation takes about five days and goes a long way to determining the viability of a crop. Rain or damp weather can ruin the procedure, and so can a farmer who leaves the beans for too long, or not long enough.

And herein lies another aspect of Ivory Coast’s cocoa troubles: as production falls and prices increase, farmers are altering their behaviour, often cutting short the fermentation process to get their beans to market as soon as possible, sacrificing quality for a quick profit.

Reaching the farmers and persuading them to ferment their beans more carefully is another huge challenge for chocolate companies. A century of cocoa cultivation in Ivory Coast has spawned a complex industry in which farmers have scarcely any contact with the big trading houses and processors, instead selling their beans to a series of middlemen who deliver them to the ports of Abidjan and San Pedro.

The chain of middlemen reaches from pisteurs – man-and-van operations that drive from village to village with stacks of cash, collecting the beans – to traitants, small trading enterprises of Ivorian or Lebanese origin that buy and sell the beans on to the big US trading houses, such as Cargill and Archer Daniels Midland, the French Touton, or Singapore’s Olam. At the very end of the line are Europe and America’s chocolate makers, which have little control over the process, and therefore the quality. With this in mind, chocolatiers and traders have been encouraging farmers to set up co-operatives from which they can buy directly. But it is a long way from happening: Ivory Coast bureaucracy is formidable and the big trading houses say that most co-operatives only last a few years before buckling under poor management or corruption. Those that have survived have only been kept alive by subsidies and near-constant supervision.

Whether all these initiatives, from Nestlé’s “Cocoa Plan” to efforts by trading houses to go out into the country to improve farming and fermentation methods, can revitalise Ivory Coast’s cocoa sector is unclear. The challenge is vast, yet the solutions must be small. Fixing all the problems will mean going from clearing to clearing, tree to tree, bean to bean. And yet the hopes of the global chocolate industry depend on it. There is no other choice for the farming executives, such as Nestlé’s Jöhr, but to roll up their sleeves and start work, and they know it.

“We cannot stay idle and do nothing to resolve the current problem,” Jöhr tells me one day after another conversation with another Ivorian cocoa grower. “We are observing a thunderstorm forming on the horizon and we need to prepare for it.”

Financial Times

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