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The Choba Choba Blog

Cacao Price: Gambling With Livelihoods

Avatar Written by Eric Garnier
Pasiona-Caballero-Mendoza

Pasiona is a cacao producer in Peru and a co-founder of Choba Choba. She has 2 hectares of land on which she cultivates her cacao in agroforestry. This year the harvest is meager, impacted in particular by an insect, carmenta sp, which ravages the plantations of the region. Since the beginning of the year, Passiona has collected only 30 “baldes” (the unit used by Peruvian producers, a “balde” is equivalent to 7 kilos of dry cacao).

210 kilos is little. Very little. Today, if she sells her cacao on the local market, she will receive about 5 soles per kilo (around 1.5 US dollars), with cacao prices falling by 30% compared to last year. What is the reason for this sudden price drop if for years the industry has evoked a risk of scarcity, fearing a surge in cacao prices?

World market price hits 10 year low

Part of the answer lies in the imbalance between supply and demand that is affected on both sides: The production in West Africa, where nearly two thirds of the world cacao come from is higher than expected. On the other hand, the consumption stagnantes. For in this globalized market, the prices payed to cacao producers in Peru, Ecuador and Madagascar are intrinsically linked to the volumes produced on the Ivory Coast or in Ghana and those consumed in developed or emerging countries.

In other words, the fact that Pasiona is offered 5 soles per kilo for her cacao on the local small market of Juanjui has finally nothing to do with the volumes of her own harvest nor the quality of her work … Because for the intermediaries, be it fine cacao, fermented and dried with the greatest care, or blackened beans from diseased fruit, it will be 5 soles per kilo.

The industry has no sustainable solution

In view of the low prices, the dependence on global market fluctuations and the indifference of local buyers to the quality of the beans, how can the sector be sustainable? For that it is necessary to drastically increase the farmers’ incomes. Because as it is today, the market does not offer cacao producers a fair price that allows them to live in dignity. Even worse, the prices do not even cover the costs of production.

So the industry does not give a solution to this problem. Price remains a hidden taboo behind sustainability programs that often impose the responsibility on the farmers themselves. The farmers are recommended to plant more in order to earn more but these programs do not tackle the industry’s great power imbalance. The idea that higher outputs will increase the farmers’ incomes is also false, since an overall increase in production automatically leads to an increase in available volumes on the market and thus to a fall in prices.

Choba Choba producers set the price for their cacao

Providing through these programs a few million cacao plants to farmers is ultimately more interesting for the market giants than for the cacao producers. This allows them to secure their supply, while keeping prices low and appraising their commitment to “sustainability”. The farmer in contrast will sooner or later turn his back on cacao that did not bring him anything in the end. The sector cannot be sustainable as long as we do not provide an appropriate answer to this central issue of the price paid to the farmer.

The large harvest that lasts from April to July in the Alto Huayabamba is coming to its end and Pasiona will reap only a few more “baldes”, but unlike most of the 6 million cacao producers in the world, Pasiona decides herself at what price she sells her cacao – completely independent of the world market price. So alongside with the other 35 co-founders of Choba Choba, she set the price for her crop: for this fine cacao that your chocolate bars are made of, she received 14 soles per kilo.

 

Eric, co-founder of Choba Choba