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What relationship do high quality, non-artisanal chocolate makers have with the cacao farmers/plantations?

And can such a general question even be asked?

I am thinking of companies like Amedei, Bonnat, Cluizel, Domori, Pralus to mention a few. I guess I am asking because I assume that in order to ensure high quality beans, these producers probably work fairly closely with the farmers, but I am wondering whether anyone on TCL can share knowledge about specific makers.

In addition, I am curious whether any of the above mentioned makers source cacao only from plantations, or also from cacao trees that grow among native rainforest species? And, can plantation cacao be free of added chemicals? Especially the more delicate species like criollo?

While I am at it (this perhaps taps into the strings that Clay and others have started about Fair Trade, how useful is it, etc...) do these direct relationships with the farmers result in decent prices for the growers? If yes, which companies?

I know that Shawn Askinosie, for example, works directly with the growers of the cacao he uses and the result is higher than Fair Trade prices and even profit sharing. How common is this among other high quality chocolater makers, especially well established ones in Europe? Is this data out there among fellow TCL members?

I ask all of this because I use various chocolates to create chocolate tasting experiences (and engage and educate people around chocolate) and I like to be able to fairly present the various makers and their strengths. As per Clay's suggestion, I will soon post an introduction to the work I am doing once life permits.

Thank you!

Sunita

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Companies will most certainly 'stake their claim' with various cacao growers and create long term contracts with them (Cluizel and Valrhona, for example, work closely with a certain operation in the Dominican Republic). I'm not going to disclose anything that's not publicly available. Some chocolate companies have gone the extra step of owning some of their own plantations as well to ensure supply chain security.

Fair trade is more than just about fair prices. Sustainability efforts in general (Fairtrade, UTZ, Rainforest alliance, etc) are about many things - the specifics of each program differ slightly - Fairtrade for example, focuses very heavily on addressing environmental and social issues, while programs such as UTZ focuses more so on productivity. All have the end goal of improving the quality of life and ensuring there's a reason and ability to continue supply of cocoa in the future. The outlook for cocoa sustainability over the next 15 years is quite scary, in fact. From the quality of life perspective, income is low, political instability is often high, soil depletion is rampant - the children of farmer are increasingly not wanting to get into the 'family business'. Education, nutrition, and access to medical facilities are less than ideal. Labor issues persist. From a quality perspective, there are quite significant declines in quality that will continue over the next 10 years - disease and pests are growing. Lack of understanding in origin regarding proper supply chain logistics are a huge problem, resulting in some 3 million tons of raw cocoa each year being destroyed. that's huge. soil depletion, poor agronomy practices, low quality cultivars, etc all result is production yields that result in non-sustainable economic yields for the farmer. The UN Human Development Index ranks most cocoa growing countries in the bottom quartile - the UN UDI is a essentially a compilation many of the above factors. I've not calculated it exactly, but if i were to SWAG it, some 80% of cocoa is grown in countries where the UNHDI is in the bottom 5-10% of the world.

So broadly, to your point, programs like fairtrade are about improving not only the economics to the grower, but much more. It's about giving them a reason to want to continue cocoa production, and for their families to want to do so. And about giving them the ability to do so. Medically. Agriculturally. Economically. Educationally. The issues are many, widespread, and significant. It needs to be addressed, and is not easy to do so.
Thank you Sebastion, and Sunita for posting this. I am small-scale when it comes to chocolate brands, and am just getting business into gear, so I have neither relationships with cacao growers nor a large market segment to influence growing/processing/pricing practices.

Beyond the sensual enjoyment, and even the nutritional aspects of cacao, part of what is so amazing to me about cacao is that it is a massively valuable global commodity which represents a dynamic opportunity to put "business" behind issues as pressing as preserving rainforest and providing "third-world" people with livelihood, and the incentive to protect their natural treasures. Perhaps I am an idealist, but my vision is all wild-harvested, resilient cacao from within natural rainforest canopies, for the ecological role of preserving our planets lungs, and the practical role of preserving biodiversity for future generations.

Perhaps the Chocolate Life may make it possible to inform and organize enough people to reverse the trends you speak of Sebastion, and any way I can support a broad-spectrum alliance to educate indigenous peoples in cacao growing regions of the importance of cacao, or experiments in sustainable growing practices which decrease susceptibility to disease while increasing soil fertility, I would love to be a part.

Sirius
Cacao may be a valuable global commodity - but it is not massive compared with other commodities.

At US$2,900/tonne (today's price) and a harvest of ~3,000,000 tonnes, the entire market for cacao as a commodity is only US$8.7 billion. Commodity coffee is about 2.5x that and at retail is estimated to be $90 billion for a total of over US$100 billion. The US chocolate market is about US$15 billion and represents about 40% of the total world market. The US wine industry (at retail only) was about US$45 billion in 2009.

It is estimated that cacao farming provides income to over 15 million people worldwide while there are roughly that many people involved in farming coffee in Ethiopia alone.

One other difference between coffee and chocolate is the price that is paid for premium beans. In the coffee world, superior beans at auction at the Cup of Excellence awards routinely fetch prices in excess of US$20 per pound. One lot of Bolivian beans fetched over US$35/lb for a total cost of US$63 million dollars in 2009. People are astonished when specialty cocoa bean prices exceed $8/lb.

People (Americans especially, I think) have come to believe that cheap food is a birthright. This is the attitude that needs to change if we are to marshall the monetary resources to have the opportunity to have a significant impact on the lives of cacao farmers worldwide. There is a lot of good work that is being done in the specialty cocoa area but the total impact, in terms of the number of farm families involved, is small.

I am open and interested to all promoting and getting involved in all sorts of educational programs that can improve the situation.

:: Clay

[ For comparison purposes, the annual value of the petroleum industry is over US$1 trillion. ]
Clay,
I'm dumbfounded by preception that cacau beans should be low priced because they are a product of 3rd world labor. I'm sure most small chocolate producers have no concept of the work required to produce the tiny beans that ultimately displayed on a gourmet shelf in the supermarket.

In reality, the prices quoted internationally for cacau beans is certainly the result of QUANTITY buyers. Cargill, ADM, Nestle, Mars, etc., purchase in 1000s of tons and have a acquisition network that streaches from the most simple farm in Ivory Coast to their corporate warehouses. Prices are determined by commodity technicians using very complex analysis of bean availability, grindings, weatherpredictions, bean production predictions, currency markets and a zillion other factors. The quotedprices are at the producers warehouse and do not include packaging, handling, freight etc. An attempt of a "bean to bar"producer to use the IOCC daily quoted priceas a benchmark for 100kg of beans is insane.

I've been at the task of turning a large, efficient, well managed farm into a profitable venture for 15 years. NOT YET....not a single cent of profit have I made in the entire episode. The following data reflect todays world in cacau from a Brazilian producers slant. I can imagine the plight of 1000s of small holders that are in the "sell or starve" position. Tomake the situation less attractive, the product harvest period lasts only 6 months, the remaining 6 months has to be supported by your PROFITS.

I invite all comers to visit our farms andput in a week of "producing cacau beans" Afterwards we can have a discussion regarding the price of beans...

Best regards
Jim Lucas
Fazenda Venturosa
Floresta Azul Bahia Brazil
cacaufarmer@yahoo.com


EXAMPLE OF A SINGLE PLOT OF WHICH WE OWN AND PRODUCE THIRTY

25-May-10 Brazil Factors USA Conversion
Currency conversion US$= R$1.86

Area 10 hectares 23 acres
No Trees 10000 10000
Manpower Required Annual 2
Mo sal & benefits less housing R$ 800.00 $430.00
Production per area (kg) 2250
Market price (25 May 2010) per kg R$ 6.00 $3.20
Annual sal & benefits less housing R$ 9,600.00 $5,161.00
Area labor costs (2 men) R$ 19,200.00 $10,322.00
Gross annual sales R$ 13,500.00 $7,258.00
Cost deficit per area (labor only) R$ 5,700.00 $3,070.00
Area break even production (kg) 3200
Production deficit per area (kg) 950
Labor cost per kg R$8.53 $4.53
Labor cost break even price per ton R$ 8,530.00 $ 4,530.00
Current world marketprice R$ 5,952.00 $3,200.00




Additional Cost Not Included
25 employee housing units+maint
water distribution system
electrical energy
fermentation technician
animal manager (transport cacau/maintain animals)
employee superintendant
professional services (account, legal, medical)
12 mules and assoc equip to transport beans
1 tractor and trailer to transport beans+maint
diesel /gasoline
farm impliments+maint+replacement
1 fermentation house+maint
9 sun dryer houses(84 m2)+maint
1 wood dryer bldg(100m2)+maint
1bean storage warehouse(90m2)+maint
school+maint
church+ maint
state taxes
federal taxes
medical assistance
property taxes 1000 acres farm land
Jim:

I support your position here entirely.

Having been on farms in Mexico, Ecuador, Venezuela, Belize, Grenada, Hawaii, and Bolivia and having taken part in harvesting and post-harvest processing I know how hard the work is.

The whole commodity market mechanism is tilted in favor of large buyers and processors and the challenge is to find ways to generate upward pricing pressure that moves the price of beans FOB the farm so that they accurately represent the cost of production and deliver enough profits so that farmers can earn a living.

One thing I know for certain is that the way most certification programs are currently organized, the "premiums" paid do not provide the economic lift that is either intended or that most consumers believe they do when they purchase certified products. Many times profit is made by the manufacturer and seller than is returned to the farmer.

One of the main things that I can do is provide a forum where the issues can be brought out into the open and discussed and a search for solutions begun. Your line item list of costs is quite illuminating.

I know that there are growers from several countries who are members of TheChocolateLife and I would be interested in hearing from them about how their cost structures compare to yours.

There are countries where the output commands prices well above spot market - Grenada routinely contracts to sell the bulk of their 500 tonne annual harvest at $5000/tonne or more - however, from personal experience I can tell you that it is the government of Grenada and the government cocoa association who profits most from this price as they control the (dishearteningly low) prices they pay to farmers and contract fermentaries.
Jim, i have been reading your post and i thank you for sharing your insights and experience. I am particualary interested in hearing more about you experiences production.

I went through your numbers and had a question :

you say you have

Area 10 hectares
Production per area (kg) 2250

So i just wanted to clarify your yield is 225 kg per hectare? So your breakeven is 320kg per hectare? Are there any major reason for the low yeild?

In venezuela most of the old haciendas that are now run as small plots by farmers have a low yeild of around 250 - 300 kg / hectare, this coupled with economic issues, political issues in the country and a spiraling inflation is what makes venezuelan cacao much more expensive. But the main issue for low yield is that the idea of running a farm like a business is what is missing. small farmers do not invest in the land, they do not prune the trees for fear of loosing a producing branch today even though the output will most likely be greater the next harvest. You mentioned that farmers do not know the return of investment or profits margin of their land and from my experience working hands on with coops and small farmers i echo this oppinion. We hold workshops with local ngo to educate farmers but it is a slow road.

look forward to hearing from you.
Clay,

Great points and perspective you offer here. However, I would love to know what beans fetch $8/lb. As far as I know Chuao or Porcelana are the most expensive and can be had for $5.50/lb (making your point even stronger)!

Thanks,
Matt
I agree that there is this notion that cheap food is a birthright. But, there seems to be a growing trend around paying more for food for intangible reasons. Whether it be organic, local, grown in a humane way, people are paying more to know that their food is healthier, happier, more ethically grown.

The conundrum is that an organisation like UTZ is targetting large companies (Coca Cola, Danone, Cargill etc) and that is good. If we can start getting the large companies to make changes to their practises, the impact is very large. BUT, the hard thing is knowing how quickly we can reasonably expect these large companies to change. Of course the smaller players doing the right thing will eventually encourage the larger players to follow... so both are needed I think. Walmart is starting to sell organic products, and yes, there are controversies around industrial organic and the standards, but I think this is at least a move in the right direction. The big companies are hearing that there is a demand for this, now it is up to us to make sure that what is being claimed is actually what is being sold. Next we will develop more sophisticated refinements to what makes for healthy food for people and for our planet.

Brings me back to my original question of how do we really know who is doing what? How do we get more transparency in the food chain. Let's stick to chocolate for now, just using organic food as an example.

An anecdote: a few weekends ago I was asked by a customer upon telling him the bar he liked cost 8 USD: "Where is the gold in this bar?"
I smiled and began to explain to him where the gold was... "it is in the cooperative farm that produced the cacao, it is in the solar powered machinery that is used to make it, it is in the careful fermentation and roasting of the beans, it is in the organic certification..."

He insisted he was just joking.
Thank you Sebastian for this post. And for helping to start what is turning into a very interesting and fruitful discussion. I was not aware of UTZ certification and after quickly reading the UTZ wikipedia entry it seems that it has some interesting points. One thing that is not clear to me was whether it is the farmers who have to pay for the certification (like in Fair Trade) or how exactly that works. Seems that a combination of the quality control, efficiency standards and training of UTZ would be an interesting addition to Fair Trade. I would agree with Clay's other posts that providing a premium price for beans regardless of quality is a bad idea at best and encourages low quality beans at worst. Fair Trade has a long way to go to get away from the perception that Fair Trade equals low quality. I find myself reluctant to say a bar is Fair Trade, because I feel the assumption is: good story, bad taste.

I wholeheartedly agree that the problem needs to be addressed on multiple levels. Communities who are not thriving (or at least managing to do more than survive) are not going to continue growing good quality cacao.

As background, my original reason for getting involved in chocolate was because I felt it was a way to address basic health and welfare issues in parts of the world where cacao is grown: clean water, access to basic health care, education, training. I was inspired by a model in Ecuador on the Napo River, run by Douglas McMeekin. Yachana Gourmet and Yachana Lodge were established as businesses to feed a non-profit organisation now called Yachana Foundation and to ensure that the communities working in these two businesses were reaping the benefits of the profits. A health clinic, a primary school and now a technical high school teaching relevant skills have been set up through this group. This to me is an example of good work.

The problem is that this is not visible to the average person who is shopping for chocolate at the specialty shop or grocery shop. One of the criticisms of UTZ is that large companies are "greenwashing", or "ethical washing" by using these certifications that are not that effective. How do I know whether the Endangered Species bar is actually doing what they claim to be doing? Short of some serious research I can't know.

Which brings me back to my original question: I want to be able to collect reliable data on various producers and how they treat the cacao growers with whom they work. Not everyone is transparent. I want to provide this data to my customers, I want to be able to talk to the folks who come in to do chocolate tastings, and tell them who are the people behind this bar. Who are the people behind growing the cacao, fermenting and drying the cacao, turning it into chocolate bars? I want to be able to tell my customers what the positive selling points of this bar are. Not just in terms of taste, which of course is important, but also, as I like to put it simply and maybe in a bit of a silly way, how happy is this chocolate bar? How much happiness does this bar pack?

I would like to believe that on a small scale initially, if I can be reliable with the data I provide, people can have more access to the stories behind the bars. It is my hope that this will affect their purchasing choices.

What I am starting to think is that I need to try to build relationships with all of the individual producers and try to suss out for myself who is doing what. This is a herculean task, which is why I was posting this in the first place. The problem with asking others for information is that I don't know how reliable the TCL members are. Not everyone posts who they are, what their background is, who they work for or why they are interested in chocolate or even what their last name is. As I write this I am fully aware that I still need to post more information and background on who I am. And be completely transparent about my involvement with chocolate. And I will as soon as I have some more time.

So, I agree with what you are saying and I am wondering if you (or anyone else who is posting here or reading) have any tips on how we can perhaps start collecting this data. How do we make it somewhat objective? Maybe I should start a community database that compiles information on producers in a rigourous and transparent way? Because it seems that the third party certifiers that we currently have are seriously flawed and we need a new way to figure out which producers are doing the ethical thing.

I have been running chocolate tastings now since 2004 in the San Francisco Bay Area. We are now taking it to the next level and have rented a space to host chocolate tastings, retail chocolate and serve as a place to educate people about chocolate. The next logical step would then be for my chocolate tasting members who are feeling more connected to the chocolate makers, to start building community with the cacao producers. Organise some trips like Clay has been organising. Go spend time seeing where their favorite bar originated. Get invested in the growers, connect a Palo Alto school to a farming community in a cacao growing community and work together to build a school, or whatever might be most needed by the cacao community. There are lots of possibilities.

And lots of questions. Before I write a book, I will stop here and wait for some responses.

Apologies to all for taking so long to respond, I have been reading all your responses with great pleasure. Thank you for all the information and for furthering my education. Have I mentioned how happy I am to be part of this great community called The Chocolate Life?
Correction, just rereading Clay's post, I see UTZ pays for the certification. Sorry about that.
Jim - what kind of yield are you getting of wet beans/ha? if that's 'business confidential', i'd understand.

The typical supply chain of cocoa is very, very complicated. Far more so than most realize, and far more so than is necessary. Recently in CDI, one farmer told me he had no idea he was making so little, once i explained to him the system of middlemen (pisteurs and tretants) that he cocoa goes through. He doesn't even know that exists, and at each of these steps, there's money changing hands that the farmer doesn't see. Governmental taxes, land ownership requirements, extension programs - etc - are all very... fluid....in many cocoa producing countries. If you're in the tax man in a government that changing every year, you're probobly not focusing your efforts on long term sustainability and re-investment of collected taxes - you're probably going to pocket as much as you can as quickly as you can because you're 90% confident your government won't exist next year.

Some countries are also very, very suspicious For example, i can easily triple the output of most farms by using pretty simple practices. The response of the government in some countries has been - 'why? you just want me to produce more so it floods the market and depresses the price we get'. And that's just one example.

Clay, i'd like to better understand why you don't believe most certification programs are providing economic benefit to the farmer, and which programs you're referencing specifically. I'd quite vigorously challenge you on that front with regards to 3 certification programs that you're probably already familiar with, but would like to get your perspective as to why you say that. Are they the bulletproof solution to everyone's problems? Certainly not. But certainly better than the status quo for most producers, and directionally appropriate. Tell me more.
Sebastian:

The only times I have personally seen certification programs work as intended is when some one or company takes responsibility for making it work. One of the programs you are probably referring to is the Utz certification program, and Cargill, for one, has been working closely with their co-ops to see that the benefits get delivered. One of the ways they take care of things is that they pay for the cost of the certification so that those costs don't cut into the premiums that are paid.

I was recently in Belize and was talking to workers at the Toledo Cacao Growers Association. The TCGA is both organic and Fair Trade certified - and I believe was the first co-op in the world to achieve both certifications. They have been lucky in that Green & Black's has provided a guaranteed market for the beans, has created a very short supply chain in the country, and has been paying the maximum Fair Trade premium of US$150/tonne irrespective of the commodity market price.

However, the total production of the co-op is low, about 40 tonnes per year, so the combined gross premium for organic and FT is about US$12000 on that 40 tonnes. There are over 900 active farmers delivering cocoa to the co-op, and by the time the certification fees and other overhead get's taken care of, the average premium to the farmers in the co-op is about US$6/year.

But that's not the entire story. Green and Black's has a rolling 5-year pricing agreement that smooths pricing volatility - protecting G&B from market highs and the farmer from market lows. What this means is that when cocoa was selling for historic highs on the spot market G&B was actually paying less for cocoa than they had been over the previous year.

I am sure that there are successes - but the average reality of Fair Trade is very, very different from the way it is marketed to consumers. For example, TransFair USA spends US$500,000 per year on rent alone for their Oakland offices. I am sure that it should be possible to spend less on rent and other non-essentials to make sure that more money makes it to the people who are supposed to be benefiting from these programs - the "producers" and "producer organizations." I have personally witnessed child labor violations in Rainforest Alliance "certified" co-ops in Ecuador. In my opinion, certification "fees" are the moral equivalent of kickbacks - and organizations like TransFair USA should be using the money they get to make the cost of participating in the program free to the farmers - and not spend it on fancy office space.

You have asked a penetrating question when you asked Jim about yield. One of the tragic flaws of most certification programs is that they don't even attempt to focus on improving the quality of the product/crop being certified or improving yields. While a focus on social issues (child labor, education, sustainability, wildlife preservation, etc.) is important, it has to be accompanied by training in improving yields and quality in order to have a hope of delivering lasting, meaningful, change.

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