Despite global fears, chocolate perseveres

Is the world about to run out of chocolate? Jonathan Gornall has a sweet surprise for chocoholics everywhere.

An employee of Mast Brothers Chocolate takes chocolate bars out of moulds at the company's factory in New York. Rick and Michael Mast currently run the company as the only "bean to bar" chocolate making company in New York. Reuters / Lucas JacksonShow less

For the past week or so, much of the global media has been whipping itself into a frothing frenzy over fears that the world is facing a cocoa shortage of catastrophic proportions.

Forbes announced “The Great Chocolate Shortage”. The Guardian went for the alliterative “Cocoa crisis” to label a story explaining “Why the world’s stash of chocolate is melting away”.

Even The Atlantic, a stately United States magazine founded in 1857, embarked on a lengthy treatise explaining that the blame for the shortage probably lay with a range of issues.

They include climate change, China’s increasingly sweet tooth, crop pestilence, and the Ebola epidemic sweeping through West Africa, where much of the world’s cocoa is grown.

No one, it seems, paused long enough to consider the grotesquely insensitive pairing of the words “crisis” and “chocolate” in the same sentence as “Ebola”, a disease in west Africa that has so far claimed close to 6,000 lives.

There was always something fishy about the great chocolate shortage story. The clue could be found in the following headlines: “Cocoa shortage could send chocolate prices soaring” (The Huffington Post).

“Worst cocoa shortage for 40 years fuels chocolate price rise fears” (Daily Mail).

“Cocoa shortage warning” (The Grocer).

Scary. Except not one of those headlines is from this year. In fact, they date from 2011, 2009 and 2006 respectively.

Cocoa-shortage scares are cyclical. Around they come, year after year, and yet, miraculously, somehow there always seems to be enough chocolate to go around.

So who could possibly stand to gain by spooking consumers with the spectre of a shortage?

To answer that, it is necessary first to understand something of the chocolate market.

The trees that produce cocoa, the basic ingredient for chocolate, can grow only in a narrow belt a few degrees either side of the Equator.

About 70 per cent of the world’s cocoa comes from west Africa, chiefly the Ivory Coast and Ghana, where it is grown on about 2 million small, family-run subsistence farms, many of which rely on child labour.

Growing cocoa does not make the farmers rich. It does, however, make the international companies who buy it and turn it into chocolate very rich indeed.

Take Barry Callebaut, a company of which very few people outside the chocolate industry will have heard. Based in Switzerland, it has factories in 30 countries supplying the raw materials to chocolate manufacturers around the world. Last year it generated sales of about US$5 billion (Dh18.4bn).

On November 6, Barry Callebaut celebrated a financial year during which sales volume and revenue rose by 12 and 20 per cent respectively, and net profit exceeded $260 million.

The future, concluded chief executive Juergen Steinemann, was downright chocolatey.

Deep within the annual report, however, lurks a cautionary note. Throughout the year, cocoa prices have shown “a continuous upwards trend”, reflecting reduced output in some areas and rising 25 per cent to more than $3,100 a tonne by August.

But “strong main and mid-crop arrivals from the two most important cocoa origins, Côte d’Ivoire and Ghana” meant that the 2013/14 season ended with “a slight surplus” of cocoa on the market.

Despite the surplus, a “bullish momentum prevailed in the market”. This had been “fuelled by fears related to the Ebola outbreak in some west African countries bordering the Ivory Coast and Ghana, el Nino forecasts and” – our italics – a potential cocoa shortage by 2020.

And there it was – “a potential cocoa shortage by 2020”, just as had been feared, and yet had failed to materialise in many years past.

On Monday, as Confectionery News reports, Barry Callebaut claims that the world’s media has “misinterpreted” a company press release.

“We currently think there will not be a 1 million metric tonne deficit in 2020,” says the spokesperson for the company, which, along with Mars, had been predicting such a shortage since 2010. We still think there is going to be a gap but assume it will be a lot less.”

What a difference two weeks makes.

The price of chocolate paid by retail consumers has risen consistently over the past decade, even as the size of some bars has been reduced.

This week the International Cocoa Organisation (ICCO) in London stepped in to scotch the shortage rumours.

It balances the interests of the countries that grow and consume cocoa and, as part of its policing of the fair-trade objectives of the United Nations’ International Cocoa Agreement, monitors the market like a hawk,

The ICCO says it has “noted numerous press reports identifying potential deficits in the supply of cocoa in the years to come, possibly reaching a level of 1 million tonnes in the year 2020” and “would like to emphasise that its projections in no way bear out this fear, which it finds to be overstated in the extreme”.

Although the ICCO’s calculations show that supply deficits are indeed likely to occur over the next few years, “stocks of cocoa beans should cushion this development before production growth accelerates”.

In addition, the season to September this year has concluded with a surplus, with the Ivory Coast and Ghana,two leading producers of cocoa, each achieving record production.

There is, in short, “no threat to the supply of cocoa for chocolate manufacture”.

A report in August by research firm Markets and Markets says that the global consumption of chocolate have reached more than 7,000 kilotons by last year.

Thanks to increasing demand from China and parts of Africa and the Middle East, it is expected to continue to grow at 2.3 per cent a year.

The real fly in the chocolate, however, is the threat of crop disease, compounded by a failure to compensate poor farmers who faced losing everything should their crops fail. In the past 10 years, a fungal disease in Brazil, for example, has reduced the cocoa yield by 70 per cent.

But market forces will save the day, says Suraj Nagvenkar, a food research analyst at Markets and Markets.

“Prices are already on the rise, and companies such as Nestle and Barry Callebaut will be affected because they would have capacity but not the raw material input for them to process and meet the growing demand,” says Mr Nagvenkar.

The only solution will be for cocoa traders to pay enough to the farmers to make it worth their while not to switch to more reliable crops as many are doing.

“Ultimately I would say the demand for chocolate can be met,” he says. “As the demand for chocolate increases, the farmers’ income could grow drastically, while consumers will pay more.”

That is, after all, a fairly reasonable definition of fair trade, leaving everyone a winner.

The poor farmers can finally afford to feed their families, the giant corporations can meet growing demand and satisfy their shareholders. Even first-world consumers, for whom chocolate-induced obesity might become a luxury they simply can’t afford, will benefit.