Cocoa Conundrum: Chocolates and problems of the commodity cycle
cocoa prices soaring 140 per cent since the start of the year have caused speculations that chocolate might vanish due to climate change or other crises. But we have been here before. Back in November 2014, I wrote in ET about chocolate companies predicting potential shortfalls of a million tonnes of cocoa by 2020. And four years before, in 2010, Anthony Ward, a UK-based commodity trader briefly cornered the market by acquiring 240,000 tonnes of cocoa, driving up prices to a 33-year high. It got him dubbed ‘Chocfinger’, after the James Bond villain Goldfinger who tried to corner gold.
Chocolate’s real problem is that it is particularly vulnerable to market manipulation. Cacao beans only grow in a narrow band along the equator. The main producers, like Ivory Coast and Ghana, have had to deal with climate change and diseases, but the biggest issue is that the production is done by thousands of small farmers who lack leverage over the market. Price rises barely benefit them.
This is why the production of cocoa has struggled to take off in India. In 1957, The Times of India reported that cacao imports cost the country ₹seven lakh per annum: “Consequently a few enterprising planters are experimenting on introducing the plant to India.”
In the 1960s, a leading chocolate company helped bring plants to India and advised farmers on growing them, with the implicit understanding that it would buy their beans.
But by the 1970s, the international market had a glut and the company found it cheaper to buy beans abroad.
