A report from climate scientists at the Colombia-based International Centre for Tropical Agriculture (CIAT), commissioned by the Bill and Melinda Gates Foundation, is projecting that ‘increasing temperatures will lead to massive declines in cocoa production by 2030 in Ghana and Côte d’Ivoire’. Ghana and Côte d’Ivoire currently produce around 53% of commercially marketed global supplies of cocoa, with Ghana producing high-quality cocoa that is the benchmark for global markets. According to the report, ‘warmer conditions mean the heat-sensitive cocoa trees will struggle to get enough water during the growing season, curtailing the development of cocoa pods.’
However, the Ghana Cocoa Board has down played the report, maintaining that it is putting in place ‘measures to mitigate the impact of climate change on cocoa production in the country’.
In neighbouring Nigeria, meanwhile, the increasing age profile of cocoa farmers is seen as likely to lead to underinvestment in the renewal of cocoa tree plantations. Currently the majority of Nigerian cocoa farmers are over 60, compared to only 3.1% of the general population. This is seen as a factor that will hold back government efforts to promote a tripling of cocoa production.
Press reports suggest this is only one dimension of the problem. In recent years, wage costs in the sector have risen faster than cocoa prices, while the processing sector is characterised by underinvestment, power stoppages and underutilisation (only a third of installed capacity is reportedly utilised). Government levies and duties are also seen as a disincentive to expanded cocoa production in Nigeria.
Agrimoney commodity analysts report that cocoa prices are being supported by a surge in European cocoa grindings (+14% in the last quarter compared to 2010), led by Germany. However, the surge is partly linked to some continuing effects from the unrest in Côte d’Ivoire earlier in the year, with annual grindings up only 8.5%. The increase is also accounted for by exports from Europe to ‘emerging market countries, where consumption is growing strongly’.
The rise in 2011 third-quarter grindings in Europe – an indicator for growth in consumption – was higher than expected, notably in Germany, where grindings were up 36%. There was also a lesser rise in the United States, but a fall in grindings in Malaysia. However, there remains uncertainty over consumption in the coming months, with the economic crisis in the West and signs of a slowdown in Asia. While growth in world consumption of cocoa is expected to be 2.5% for 2011/12, it could easily drop to 1%.
After a record 2010/11 cocoa season for West Africa, with more than 1 million tonnes produced in Ghana and 1.48 million tonnes in Côte d’Ivoire, signs for the new cocoa season are positive, with favourable climatic conditions. The International Cocoa Organisation has said that there may be a market surplus in 2011/12 with a downward effect on prices, which fell in the last quarter of 2011 on the London and New York markets.
In Nigeria meanwhile, the Cocoa Processors Association of Nigeria (COPAN) has been calling on the government for many years to address the problems in the cocoa processing sector, which has been struggling particularly with the high cost of cocoa beans and electricity cuts. In 1986, about 18 processing facilities were functioning, with a total capacity of 200,000 tonnes, however only a few of these remain, processing less than 40,000 tonnes of cocoa a year. COPAN puts the blame on the deregulation of the sector, with prices to growers determined by international markets, and the fluctuation of the naira. The high international prices for cocoa have led to a rise of over 50% in the domestic price for cocoa over the last 5 years, leading to the closure of many processing units. Another grievance is the long period taken to pay the Export Expansion Grant (EEG), a financial incentive granted by the government to support non-petroleum exports and local processing. COPAN considers that in the current situation, cocoa processors may shift their production elsewhere, following the example of Cargill, which left Nigeria 3 years ago to set up a 60,000-tonne capacity processing unit in Ghana.
The International Centre for Tropical Agriculture (CIAT) report on the impact of increasing temperatures on the cultivation of cocoa in West Africa is certainly a matter for concern, but the effects, if realised, are not expected until 2050, which leaves a margin for manœuvre. CIAT advocates a number of measures in its report to alleviate the effects. The increasing numbers of projects promoting sustainable production of cocoa in West Africa are also a positive signal of improvements in how the environment is taken into consideration.