Understanding Cocoa: Trends

In 2017/18 world production of cocoa was at 4.6 million tonnes and global demand for cocoa is forecasted to grow.1 In our series on “Understanding Cocoa”, we explore market trends and regulations impacting the cocoa industry.

 

Theobroma cacao is a tropical tree that originates in the Amazon jungle, in the area where Colombia, Ecuador, Peru, and Brazil meet. There are three well-known varieties of the cocoa tree, “Forastero”, “Criollo”, and “Trinitario”. It is important to highlight that since scientists have been able to analyse and classify cacao with DNA, it has become apparent that there are in fact 10 major families of cacao.2 Other varieties include ‘Amelonado’ and ‘Nacional’. 
Each variety of the cocoa tree produces cocoa beans with a varied flavour profile. Forastero presents a strong chocolate flavour, while the flavour of Criollo is characterised as being delicate and sweet. Trinitario, on the other hand, is known to have a more floral flavour with fresh nut notes. Currently, Forastero accounts for about 80% of the world’s cocoa supply.3 This can be attributed to the fact that it is much hardier and less susceptible to diseases compared to the other types. However, there is an increasing demand for ‘fine flavour’ cocoa, which is generally produced from Criollo or Trinitario beans.4 This is also accompanied by the increased demand for specialty chocolate, in particular, ‘single origin chocolate’. 


Supply and demand

There has been a rising demand for organic cocoa which is also expected to continue to surge over the coming years. There is an ever-increasing awareness amongst food manufacturers and consumers about the benefits of organic produce. At present, roughly 3.4% of cocoa is grown organically.4 As it is quite a difficult crop to grow organically, there remain some challenges to increase the overall supply to meet the consumers’ demand for products from organic agriculture. 

For some time, there has been a tight relationship between the supply and demand of cocoa. The International Cocoa Organisation (ICCO) forecasts a global cocoa deficit in 2020.5 However, while “supply deficits are likely to occur during the next several years, stocks of cocoa beans should cushion this development before production growth accelerates.”
Nevertheless, cocoa prices remain extremely volatile due to weather conditions, pests and diseases, and political instability impacting cocoa production. In 2015/16, cocoa prices dramatically increased as the Harmattan winds and dry weather caused production and quality levels to fall from Cote d'Ivore to Brazil.6 During this season, there was a  global supply deficit, and the global cocoa stocks were reduced to the lowest levels since 1985.7 Conditions changed/picked up again, however, and the 2016/17 season brought a good harvest, which resulted in a structural oversupply of cocoa and a subsequent drop in prices. As much as a third of the value of cocoa was swept away, with one tonne of cocoa going from above USD 3,000 to below USD 1,900.7 

This was a big blow to farmers’ incomes. Since the collapse there has been a steady upturn in the prices of cocoa. The governments of Ghana and Côte d’Ivoire—two countries which together produce roughly 65% of all cocoa beans globally—have responded to the crisis of 2016/17 with a new cocoa floor price to improve farmers’ incomes.8 Although cocoa prices will continue to fluctuate, farmers in these nations are guaranteed a floor price of USD 2,600 per tonne of cocoa beans for the 2019/2020 cocoa season. It looks as though favourable weather conditions in July and early August 2019 have secured ample supply for the upcoming harvest in Cote d'Ivore and Ghana. While this probable boost in supply is likely to reduce the price of cocoa, the new floor price will ensure that the cocoa farmers’ wages are not impacted. It is not only necessary to ensure cocoa farmers a living wage but also to promote sustainable farming practices to improve cocoa bean quality.9 

Not only does sustainable agriculture promote economic stability for cocoa farms and increase farmers’ quality of life, it is necessary for cocoa to certain requirements in the European single market. Producers must follow strict agricultural practices to ensure food safety and quality of the cocoa beans. The Cocoa of Excellence lists various factors that define the quality of cocoa which include: Good trees which are well cared for, grown in a suitable environment, and that the pods are correctly harvested; that good practices are undertaken to keep the trees healthy and free of pests and diseases; and that the optimum fermentation and drying protocols are used for each type of bean.10 Following these protocols it is also necessary to control food contamination and ensure that contaminants are kept below certain levels. While it is easy to control certain contaminants, such as by using less pesticides, some contaminants, such as cadmium’ are naturally occurring. 

Cadmium regulations for cocoa

Cadmium is a heavy metal found naturally in the soil. It is of no use to the human body, in fact, it can be toxic at very low levels and is linked to various health problems. It has been reported that the presence of cadmium is a particular problem for cocoa due to volcanic activity and forest fires increasing the occurrence of cadmium in the soils where cocoa trees readily absorb the heavy metal. Therefore, on the 1st of January 2019, the EU enforced a new cadmium regulation which imposes maximum levels of cadmium for food commodities such as cocoa powder and cocoa beans.11 


The new cadmium regulations will not greatly impact manufacturers that blend cocoa beans from different areas and dilute them with other ingredients, as these practices can reduce cadmium content. Single origin chocolate makers and smaller manufacturers will need to look for other ways to ensure low cadmium content in their products. It is imperative that farmers stick with low cadmium root stock plants, breed new varieties that are less prone to cadmium uptake, and modify soils to reduce plant cadmium uptake. Furthermore, manufacturers also have to pay attention to and ask for new certificates from their suppliers to ensure that they comply with the new regulations. 
The EU will provide funds to cocoa farmers in order to encourage and support their transition to more sustainable cocoa production, with activities related to cadmium.12 

An exploration of the cocoa industry as well as the trends driving the cocoa market not only sheds light on how global cocoa trade can become more efficient but also on how a sustainable cocoa future can be achieved for all parties along the cocoa supply chain. If you’re interested in finding out more about these topics, don’t miss our articles on understanding cocoa sourcing and sustainability challenges of the cocoa industry. 


References 

  1. https://www.icco.org/home/latest-news.html 
  2. https://thechocolatejournalist.com/cacao-varieties-demystified/
  3. www.cacaoweb.net/cacao-tree.html
  4. https://www.cbi.eu/market-information/cocoa/trends/
  5. https://www.icco.org/about-us/icco-news/270-icco-statement-on-reports-of-a-cocoa-supply-deficit-in-2020.html
  6. https://www.wsj.com/articles/icco-raises-world-cocoa-deficit-as-dry-weather-hits-crops-1464717282
  7. https://www.voicenetwork.eu/wp-content/uploads/2019/07/2018-Cocoa-Barometer.pdf 
  8. https://www.solidaridadnetwork.org/news/new-cocoa-floor-price-step-towards-more-equal-trade 
  9. https://www.moneyweb.co.za/news-fast-news/good-news-for-chocolate-lovers-as-rains-boost-africa-cocoa-crops/
  10. http://www.cocoaofexcellence.org/about-us/what-makes-cocoa-excellent-and-why-diversity-matters/
  11. https://ec.europa.eu/food/safety/chemical_safety/contaminants/catalogue/cadmium_en
  12. http://www.ictsd.org/bridges-news/bridges/news/eu-regulation-on-cadmium-in-chocolate-fuels-wto-debate-on-health 

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