The world’s facing a bittersweet situation when it comes to chocolate. While demand remains strong, a shortage of cocoa beans is causing prices to skyrocket. Cocoa prices have surged to a record-breaking $10,000 per metric ton. The last time cocoa futures were above even $5,000 was 46 years ago. These record price hikes are the result of adverse weather conditions and diseases impacting African cocoa production. The major culprit for the current cocoa crisis is El Niño, a weather phenomenon that brings drier conditions to West Africa. Drier weather stresses cocoa trees, leading to lower yields. This has cost Ghana nearly 500,000 hectares of land in recent years. The International Cocoa Organisation (ICCO) expects global cocoa production to fall by 10.9% this season due to this lack of rainfall. This has disrupted the supply chain. According to a report from Reuters, major African cocoa plants in Ivory Coast and Ghana have stopped processing because they can not afford to buy beans.

Usually, the cocoa trade works like a well-oiled machine. Farmers sell their beans to local dealers, who then deliver them to processing plants or giant chocolate companies like Nestle or Hershey’s. These companies plan, by buying beans from processors at fixed prices. It is kind of like reserving a spot in line. The government also sets a minimum price to protect farmers. However, the cocoa shortage has thrown this system into disarray. Local dealers, desperate to secure beans, are offering farmers more money than the agreed price. This leaves processors empty-handed, as they miss out on the beans they already ordered. As a result, chocolate companies have to raise prices to keep up with the rising cost of cocoa. 

West Africa’s mixed fortunes in the global chocolate crisis

West Africa, particularly Nigeria, Ghana, Cameroon, and Ivory Coast are the top cocoa producers. These three nations collectively produce a staggering 75% of the world’s cocoa beans. The region’s dominance in the cocoa industry is deeply rooted in its history and geography. During the colonial era, European powers, particularly Britain and France, actively promoted cocoa cultivation to meet the growing demand for chocolate in Europe. This period saw the introduction of high-yielding cocoa varieties and the establishment of large plantations. 

Today, cocoa is a major cash crop for the region. It is estimated that cocoa cultivation employs around 20 million people across the region. On the surface, a surge in cocoa prices to a record-breaking $10,000 a ton spells good news for the region’s farmers. In theory, their earnings should skyrocket. However, a closer look reveals the fragility of this potential boom, as local challenges threaten to undermine it. 

In Ivory Coast, cocoa production accounts for 14% of GDP. The country produces 40% of the world’s cocoa beans making it the highest producer of cocoa beans. Millions of Ivorians rely on cocoa for their livelihood. Yet, many cocoa farmers have struggled to make ends meet due to historically low farmgate prices. A report by Fairtrade found that the average cocoa farmer in Ghana earns just $6 for every $100 bar of chocolate. Although West Africa, has long been the cornerstone of the global cocoa industry, its farmers have seen a disproportionately small share of the profits. Farmers haven’t had the resources to invest in their farms or fight off disease. This means they have older, less productive trees and difficulty implementing measures to combat threats like swollen shoots. A cycle of low prices and neglect has ultimately contributed to the current shortage and threatened long-term sustainability. 

Similarly, Ghana which produces 20% of the global cocoa supply, battles with low farmgate prices and farmer poverty. This has led farmers to engage in harmful activities like illegal mining where they lease their land to illegal miners in exchange for payment. These mining activities degrade the quality of the land, making it unsuitable for cocoa cultivation. In 2018, the Ghana Cocoa Board (Cocobod), the country’s cocoa regulatory board used part of a $600 million loan from the African Development Bank to rehabilitate aging plantations and those hit by diseases. Last year, they set up a task force to shield cocoa farms from the harmful impacts of mining.

This crisis also sheds light on the persistently dwindling cocoa production plaguing other West African cocoa producers. Unlike Ghana and Ivory Coast, Nigeria’s cocoa industry presents a tale of missed opportunities. In the 1960s, Nigeria was the second-largest cocoa producer and the highest source of FX. Over 50% of all exports in the 1970s and over 60 percent in 1980 were cocoa products. However, policies in the 1970s and 80s prioritized oil production over agriculture. This lack of investment in the cocoa sector hampered development and modernization. Many Nigerian cocoa trees became old and less productive. The spread of diseases like the swollen shoot virus further reduced yields. By 1998, Nigeria’s cocoa share steadily decreased, falling from 49% in 1989 to 22%. Poor infrastructure such as inadequate transportation networks, further dampened cocoa supply. Ultimately, Nigeria’s share of the global cocoa market shrunk, leading to a loss of potential export earnings. Currently, Nigeria produces 6% of the world’s cocoa, a significant contribution globally, yet, a far cry from its past capacity.

The chocolate situation is unlikely to improve soon. The ICCO estimates a shortfall of 374,000 tons this season compared to just 74,000 tons last year. Experts like analyst Edward Wateridge of Tropical Research are even predicting another deficit next season due to the severity of the disease outbreak. However, the crisis also presents an opportunity for West Africa to up its role in the chocolate industry. For some, it presents a chance to rewrite their narrative within the cocoa industry. For others, it is a chance to leverage their position as a major cocoa producer and push for a fairer trade model. This could involve demanding higher prices directly from cocoa buyers or amping investment in sustainability. The current crisis presents a golden opportunity West Africa can’t afford to miss.

Elsewhere on Ventures

Triangle arrow