Good news for cocoa farmers: Windfall gain if price upswing sustains

Ten years ago, the international market price for a kilogram of dried cocoa nut was around Rs 152, on average in Kerala. As of April, it has soared to Rs 800. Farmers report that traders are now actively seeking them out with offers even higher than that. This points to the high demand for cocoa.

The next aspect is whether this impressive profit-taking can continue. Experts in the field predict that the current record prices will not last for long. The main reasons for the recent price hike are severe production declines in leading cocoa-producing countries and limited availability due to non-seasonal factors. Ivory Coast and Ghana, which contribute to 60% of global cocoa production, are currently experiencing the adverse effects of the El Nino climate phenomenon.

Due to increased humidity, cocoa plantations in both countries are experiencing severe diseases and pest attacks. The scarcity of beans has resulted in many leading processing and manufacturing companies in these countries having to shut down multiple plants. Similar conditions prevail in the cocoa farms of Cameroon and Nigeria. Even after the diseases and pests are controlled, the prices are expected to get a downward correction.

However, some analysts feel that global conditions are conducive for cocoa to get ‘fair’ prices. Analysts say that both short-term causes and long-term situations will influence cocoa's future prices. For instance, global warming poses a threat to cocoa cultivation in Africa. The European Union (EU) has already imposed restrictions on cocoa due to the large-scale deforestation resorted to ahead of cultivation. On the other hand, global chocolate consumption is increasing every year. The sole source of pure chocolate is cocoa and, so far, there is no chemical substitute to it. During the transformation of cocoa into chocolate, about 3600 different chemical reactions occur, including during processes like fermentation, drying, and roasting.

It is for the same reason that companies like Cadbury take the lead in cocoa cultivation. In spite of such efforts, there is a shortage of cocoa beans. Analysts predict that the gap between supply and demand is likely to widen in the coming years and this could make cocoa farming increasingly lucrative. Over a decade, cocoa prices have shown stability. Historically, during the season, farmers in Kerala received between Rs 45 and 65 for green cocoa. The price of dried cocoa was between Rs 165 and 185. However, the farmers are not entirely satisfied with these prices. Farmers are not abandoning cocoa cultivation because it is largely an interim crop and the effort and maintenance required is ‘manageable and minimal.’

For small farmers, the weekly income from cocoa farming is not insignificant — it is sufficient to run their households. Also, the absence of severe price drops motivates them to continue farming. They operate on the premise that ‘it's neither bad nor excellent.’ The renewed surge in cocoa prices has come as a surprise to them. Farmers currently do not expect this 'lottery' of high prices to last indefinitely. Instead, they believe that with stable rates of about Rs 65 for green cocoa and Rs 250 for dried cocoa be commensurate with their efforts.

The current spike in cocoa prices is beneficial but many farmers are not in a position to fully reap the gains. The price crash of the 1980s significantly impacted a large number of cocoa farmers, turning them away from cultivation. The 2018 floods and increased wild animal incursions, especially monkeys and squirrels in the hilly regions, caused many farmers to abandon their crops.

When cocoa cultivation decreased in Kerala, it picked up in Andhra Pradesh and became the leader. Thai apart, Tamil Nadu, Assam, and Meghalaya also began to put in significant efforts into farming cocoa. In the West Godavari region of Andhra Pradesh, cocoa farming is done on a large scale and in a highly scientific manner. On an average, a tree in Kerala might produce around two-and-a-half kg of dried cocoa annually. The yield in Andhra Pradesh can be more than double that.

Despite the higher yield in Andhra Pradesh, the cocoa butter content in the beans grown there tends to be lower due to the adverse climatic conditions. In contrast, cocoa beans from Kerala are considered superior in terms of quality and flavor due to the state’s intermittent rainfall and climatic conditions. This is why major chocolate companies show a preference for Kerala beans.

Cocoa is not a crop that can be hurried to maturity; it takes about 1.5 years to bear fruit, but achieving optimal yield might take up to 4-5 years. Thus, cocoa cultivation is not suitable for those looking for a quick return on investment. In Kerala, cocoa is grown as an interim crop between coconut and arecanut. This pattern supports sustained production over long periods.

In the current situation, there is a renewed consideration for giving cocoa a place in mixed-crop farming systems. Dr. J.S. Minimol from the Cocoa Research Center at the Kerala Agricultural University suggests improving neglected plantations to boost production. She notes that many farms are not properly maintained, following a "good enough" approach, which isn’t sufficient for optimal productivity.

Proper care can significantly enhance production levels in a short amount of time. A mature cocoa tree, when well-maintained, can yield an average of 150 pods annually, with some trees producing even double that amount. Although the primary production season is from April to July, farms with proper irrigation and care can maintain a good yield all year round. These farms utilize trees that are genetically enhanced to adapt well to the local climate and resist diseases and pests more effectively.

In India, the consumption of chocolate is considerably lower compared to other regions. For instance, the average Russian consumes about 9.08 kg of chocolate annually, closely followed by the British. In stark contrast, the average Indian consumes only about 0.20 kg per year. This is a significant factor that attracts major chocolate companies like Cadbury and Nestle to the Indian market, anticipating a potential increase in demand. As India gradually shifts from traditional sweets to chocolate, these companies foresee a more profitable future in the Indian confectionery market.

Even during the COVID period, the chocolate industry in the country has seen growth. While major players like Cadbury and Nestle hold a significant share of the Indian market, there are small-scale entrepreneurs as well. These small businesses directly source cocoa from farms and produce high-quality premium chocolates, particularly in Kerala. They import advanced machinery from countries like Italy to enhance their production. Additionally, these small units are not just producing plain chocolates; they are innovating by substituting cocoa butter with vegetable fat and other ingredients.

To gain knowledge and expertise in cocoa cultivation, processing, and chocolate production, people can connect with the Cocoa Research Center at the Kerala Agricultural University located in Vellanikkara. This center is actively providing systematic training sessions for entrepreneurs for a nominal fee. Those aspiring to start ventures in chocolate manufacturing need to master both the art and science of chocolate making. The center offers guidance at every stage of cocoa farming and processing, including harvesting, fermenting, and drying. It also develops technological know-how for creating products like cookies from cocoa. The phone number is 0487–2438451.