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Today we had a group of cacao growers from Santo Domingo, Ecuador.  The discussion was about how they get paid.  Typically growers take their cacao to centers where they sell their cacao.  They said that they get paid the same price for Nacional (fine aroma cacao), than they get paid for CCN-51, the clone that is taking over both Peru and Ecuador.  It also doesn't matter whether they ferment their beans or not, or if they put monilla(rotten cacao) along with good cacao.  What they are looking for is a partner in countries that process the cacao into chocolate and are willing to buy the good cacao for a higher price than CCN-51 or cacao that has not been selected.

As a group, we should find a solution for these farmers, we need to let them know that if they produce excellent cacao, they should get paid a higher price.  That way the heirloom varieties can be preserved.

 

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There's a disconnect with the breeders, the growers, and the buyers.  Breeders are propagating for yield and disease resistance, and it's rare to meet a farmer who has even ever tasted chocolate.  Breeders often don't understand that there are multi-dimensional variables that are important - although for some parts of industry, yield may be the most important (ie, if you're simply pressing it into cocoa powder for the powder - a high yield, low fat bean may be very important to you.  flavor is less so if you're going to alkalize it anyway and create your own flavor).  His experience is likely with Transmar, who - while they shouldn't be purchasing fungally infested beans - are not going to be overly discriminating from a quality standpoint. They're a volume player.

 

Create the demand or control the supply - it's really the only way it will happen.

Sebastian,

Cacau is sold by weight and the producers are striving to maximize this attribute. It makes little economic sense to produce organic beans for 10% premium (standard in Brazil), when the addition of fertilizer increases the quantity produced by 50%.

 

Your comments regarding "create the demand" has the most interesting impact. Unless buyers are willing to contract for an entire farm production, it is unlikely they will be in a position to dictate production techniques. In all cases, the producer is unable to produce 100% cacau of excellent quality. Disease, production processes and other factors influence quality. Will the buyer accept the "discards"?

 

The inescapable fact is, flavor is one of the least considered factors in producer earnings. In addition, 10% of cacau beans produced are absorbed by fine chocolate producers, the remainder goes to multinationals. Until high end chocolate producers accept the fact that premium beans are in fact "premium priced" there is a serious "log jam" I do not know a single producer that is interested in selling premium beans at any cost.

 

A solution for those interested in long term supplies of high quality beans is to invest in the farms and take an active role in its operations. Any takers?

 

Jim Lucas

 

as jim says, the only way to have growers interested in growing fine cacao, organic cacao, fermenting and drying, or doing anything other than low quality high volume, is to make it more profitable for them by paying a premium price for beans. and the only way to do that is to have a high end market to sell the higher priced beans into, as beans or as chocolate. so it requires a holistic approach with a strategy for moving the premium priced beans into the fine market at a profitable markup.

 

what jim says about the discards is very important.  if i ask a farmer to sell me only his best beans, what does he do with the rest? the acopiador (middleman) who used to buy all his beans will not accept only his worst beans, or will pay an unattracticely low price.  what we do to address this is buy the bad beans dry at the next harvest, at local market price, transport them along with the good beans, and mix them along with our flat and small discards from my post-harvest processing plant, and sell them to an acopiador.  that way the farmer is happy and the acopiador is satisfied.  its not profitable for me but its not a loss either and the farmer is happy which is the most imporant thing.

 

saludos

brian

The garbage beans should be thrown away. Just because it has become standard practice to mix the rotten beans in with the good beans and sell them, that doesn't  mean it should continue to be done. One cacao farmer told me a few weeks ago that Europeans will not buy the rotten beans but Americans will. We pay more for the good beans that have no rotten beans mixed in and that's the way it should be. The farmer's feel better because they are selling a quality product and being paid well for it. They don't like selling rotten beans or CCN51 because they know it is an inferior product.

Having done this professionally for over 20 years, I have a fair bit of insight into what works and what doesn't, and have learned a thing or two about how systems work (or don't) in almost every origin.  I'm familiar with the entire supply chain and the dynamics that are important at each of the steps - and they often are in conflict with one another.  I know what motivates breeders, NGO's, farmers, middlemen, exporters, warehousers, the trade, and manufacturers.

 

I'm trying to say that I understand it better than most.

 

Hence the reason I stand by my statement that the only way to address what the original poster asked, is either

1) by creating sufficient supply demand as to 'pull' the specific requirements forward while simultaneously generating the volumes to allow product differentiation to provide an outlet for that material which does not meet the highest of standards (because it will always be there). Unfortunately, the small chocolate maker is not sufficiently coordinated to work closely with his/her peers to consolidate their demand, or they're more interested in flavor differentiation, thereby fragmenting the market and subsequently allowing for a continuation of the problem (now you have 100 buyers buying from 100 regions/farmers vs the 100 of them consolidating their purchases into a single farm, clearly identifying the post harvest parameters and handling requirements that will yield their requirements).

 

2) controlling the supply.  buy your own farm and run it.  very few can/want to do this.   And you still must have product differentiation or accept low yields due to destruction of non-conforming product.

 

Jim's solution requires a minimum volume threshold to make it viable, both from the farmers perspective as well as logistically.  Sure a chocolate producer can buy out a small farms volume, but the costs involved in getting the beans to the use will will result in a $20 chocolate bar.  It works, and is the basis behind my #1 above.  Prerequisite = volume.  Form a purchasing co-op of sufficient volume to fill half containers minimum at a time, and provide a fiscal incentive for quality.  Now you've reached critical mass.

Officially there is a premium for fine cacao, but in the field farmers are still powerless when they need their cash.  I worked with a program in Ecuador that helped set cacao farmer´s associations, in order to get individuals working as a group, and this turn to be a great step towards getting better prices and conditions for their cacao.  i know it is not easy to set up groups, and trust others but it seems to be the only way for small holders.

Lourdes,

What and where is a official premium paid for fine cacau? What is the value of the premium?

 

I have watched the formation and failure of dozens of farmer associations. The issue remains the basic price paid for cocoa beans. Until chocolate lovers accept the fact that cocoa producers are underpaid for the product.....a group of poor farmers working together do not change. THEY STILL REMAIN A GROUP OF POOR FARMERS. Adding the expense of coop administration to the already overburdened farm economics simply complicates individual budgets. There are success stories from various parts of the industry where small holders have banded together, normally short lived. The only success story that endures is of the big 5 multinationals that control the world market price. I wish it could be changed but it's not likely in the near future.

 

The cost of producing "premium fine" cocoa is much higher than "bulk beans", as individuals and as coops. If you have an example of a coop that has raised small holders from poverty to "middle class", please let me know and I will personally visit them in order to understand the process.

 

Best regards

Jim Lucas

Jim:

Perhaps you should also add to the list of criteria for your example .... a co-op that did not accept outside aid. Many of the purported benefits of "fair trade" certifications come about because some external group - some NGO or often USAID (especially in Peru) - covers both the upfront and on-going costs of certification.

When you eliminate outside aid from the equation you'll see that there are very few instances where it has happened from the grower up.

Sebastian brings up a very interesting point, which is that maybe it makes more sense for small chocolate makers to get together into a PURCHASING co-op rather than forcing the growers to organize. By doing so, the purchasing co-op drives larger volume purchases, which can start driving the critical mass of volume necessary to move away from commodity market pricing to specialty market quality, and the higher prices quality can command.

A purchasing co-op could also work to reduce the costs of transportation, one of the key limiters to supporting small specialty growers - there's never a full container.

To be clear, there are huge advantages for the growers to cooperate as well, although it also brings another level of challenges. It is not a prerequisite to the OP's question; however demand volume is (well, synchronous demand volume is).

 

As I was driving back from the mtns today, I was looking for non-confidential examples that would be useful in helping illustrate the idea.  Domori, Valhrona, Amedei, etc all are able to secure appropriate quality cocoa and keep their suppliers happy.  How do you think that's done?  In addition to working closely with them to maximize quality (ie minimize the defect stream), there's a captive volume at a mutually beneficial price.  This approach could run into a number of potential issues - ie most chocolate mfrs don't know step 1 about cocoa quality or maximizing it; if they do have something they think is unique, there's likely to be a protectionist approach to guard their secret; there's a tendency to similarly guard your supply chain for fear of someone else 'stealing' your flavor. 

Consolidating your purchasing power will require that these hurdles be cleared.  A very frank assessment of which is more important will be needed.

I would enjoy talking more on this topic.  My experience is also in the Dominican Republic and my in-laws are also members of a cooperative where they sell their wet or dry beans.
I think you will find most resistance in the DR coming from a single large entity, who also has deep ties to banking and shipping.  Overcome that, consolidate a large enough purchasing base, and teach the farmers how to ferment (and dry...) appropriate to that purchasing base, and i think you've got upside there.

Unfortunately, in Ecuador as any country producer of cocoa, the small farmer, be it rural poor, needy, trying to sell their cocoa when is baba (wet, fresh from the cob), because it needs and is always in need of money to cover their most urgent and obviously does not care that you choose their cocoa as this will decrease your income. Rarely given the job of fermenting (5 to 7 days) and even worse dry the grain, he needs money urgently, so that the acopiador(collector) from the nearest town buys it solely based on their degree of moisture-reducing price of course-which allows the farmer to have money for their most urgent expenses.. Such is the state of liquidity, often finds it expensive to buy pesticides for their high cost, forcing it to grow semi-organically, however which it can not be credited as an organic producer by the high costs of accreditation, making it reluctant to form partnerships with other peasants, because that means waiting longer for sale, and if the market demands high levels of quality, does not care if the grain is chosen or mixed.

No poor farmer has gone out of their poverty, partnering or cooperative, which is why everyone tries to survive as he can, that's what everybody knows, however from which cocoa is still buying the big multinationals, regardless of destination those who work the land, keep track of plants, care for and harvest their fruit, after which still prostrate in his misery.

The small Ecuadorian farmer, planted their cocoa, without being conscious of the unrivaled quality of the grain, because it knows that the world of fine cocoa aroma is highly priced, and whether they knew it, in its simplicity and humility would have no greater importance, he sees it simply as his means of livelihood.
To help the small farmer, it is first necessary to invest in training, seed selection, crop mechanization, but this means putting money in advance so that after a long period, see results. That does not interest any exporters or multinational, because it means fail to gain immediately by that investment.
In short, our poor farmers will remain in poverty despite being the creators of agricultural wealth, becoming victims of our famous globalization means to them a new chain of slavery.

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