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Development of a Sustainable Development of a Sustainable Cocoa Supply ChainCocoa Supply Chain

John Lunde & David StuartJohn Lunde & David Stuart

Representing:Representing:

The Global Chocolate GroupThe Global Chocolate Group

January 15, 2003January 15, 2003

AGOA Meeting--MauritiusAGOA Meeting--Mauritius

cocoaAGOAm1d15y03

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Sustainable Cocoa:The BeginningsSustainable Cocoa:The Beginnings

Smithsonian Sustainable Cocoa Smithsonian Sustainable Cocoa Conference 1998- Conclusion:Conference 1998- Conclusion:

“Cocoa -- An economic engine “Cocoa -- An economic engine and conservation tool for the and conservation tool for the rural tropics”rural tropics”

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Sustainable Cocoa TeamSustainable Cocoa Team Sustainable Tree Crops Program begins in Sustainable Tree Crops Program begins in

1998 - shortly after Smithsonian conference. 1998 - shortly after Smithsonian conference.

Initial team: African partners, USAID, USDA, Initial team: African partners, USAID, USDA, NGO’s, UNDP, International Institute of NGO’s, UNDP, International Institute of Tropical Agriculture (IITA) and Chocolate Tropical Agriculture (IITA) and Chocolate Industry.Industry.

Modest beginnings, positive contributions Modest beginnings, positive contributions from partners and much learning on industry from partners and much learning on industry sideside..

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Sustainable Cocoa TeamSustainable Cocoa Team Break through goals developed: Break through goals developed:

Sustainability through improving Sustainability through improving well being of small holders, their well being of small holders, their families, communities & protecting families, communities & protecting the tropical environment.the tropical environment.

Working partnership expanded and Working partnership expanded and today, includes DOL, ILO, GTZ.today, includes DOL, ILO, GTZ.

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Strength through PartnershipStrength through Partnership STCP organized into national networks STCP organized into national networks

of government, NGO’s, researchers, of government, NGO’s, researchers, and farmer organizationsand farmer organizations

Networks: Ghana, Cameroon, Guinea, Networks: Ghana, Cameroon, Guinea, Nigeria, and Guinea and they work Nigeria, and Guinea and they work together regionally!together regionally!

Managed through IITAManaged through IITA Resources, knowledge shared and Resources, knowledge shared and

leveraged for leveraged for HOLISTIC APPROACHHOLISTIC APPROACH

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The Economics of CocoaThe Economics of Cocoa

3 million T annual production3 million T annual production Current market value of US$ 6 Current market value of US$ 6

billionbillion 3% per year annualized increase 3% per year annualized increase

in demand over last 100 yearsin demand over last 100 years 68 to 70% of world cocoa from W. 68 to 70% of world cocoa from W.

AfricaAfrica

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Cocoa Production ShiftsCocoa Production Shifts 1900 - Top three1900 - Top three

• South America 47%South America 47%• Caribbean Caribbean 30% 30%• Africa 15%Africa 15%

2000 - Top three2000 - Top three• Africa 66%Africa 66%• SE Asia 18%SE Asia 18%• South America 11%South America 11%

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LMC COCOA demand chartLMC COCOA demand chart

World Cocoa Production, 1900/01-1999/00World Cocoa Production, 1900/01-1999/00

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1900/01 1910/11 1920/21 1930/31 1940/41 1950/51 1960/61 1970/71 1980/81 1990/91

'000

mt

2000

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1997/98 Crop Year

41,0%

13,3%

13,3%

6,4% 5,1% 4,0%3,8%

3,3%

9,8%

Data A

Ivory CoastGhanaIndonesiaBrazilNigeriaMalaysiaCamerounEcuadorROW

World cocoaWorld cocoaproductionproduction

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ApproximateApproximate VolumeVolume of Cocoaof Cocoa

Farmers

Exporters

Pisteurs

Traitants

Numbers of participants Tonnage of cocoa

600,000

Around 5,000

Around 250

30

4 - 6 Shipping Lines

Produce 0.5 - 3 tonnes

Collects 100 - 200 tonnes

Collect and transport 500 - 10,000 tonnes

Process and export10,000 - 60,000 tonnes

Ship over 100,000 tonnes

Processors

Manufacturers 9 (US)

5 (US)

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Cocoa -- A Small Holder CropCocoa -- A Small Holder Crop

1.2 to 1.5 MM farms in W. Africa -- 1.2 to 1.5 MM farms in W. Africa -- 3 to 7 ha average3 to 7 ha average

10 MM people on cocoa farms10 MM people on cocoa farms Supplies up to 56% of the Supplies up to 56% of the

household cash in Ivory Coasthousehold cash in Ivory Coast Households growing cocoa are Households growing cocoa are

better off.better off.

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Cocoa is Critical for TradeCocoa is Critical for Trade As much as 45% of country’s foreign As much as 45% of country’s foreign

trade can come from tree crops, including trade can come from tree crops, including cocoa.cocoa.

Tree crops supply 19% of foreign Tree crops supply 19% of foreign exchange for Africa.exchange for Africa.

Africa has a comparative advantage with Africa has a comparative advantage with cocoacocoa

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Cocoa Economics in the U.S.Cocoa Economics in the U.S.

US averaged around 750,000 T US averaged around 750,000 T consumption over last 3 years.consumption over last 3 years.

58% of US cocoa comes from W. 58% of US cocoa comes from W. Africa.Africa.

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Cocoa Economics in the U.S.Cocoa Economics in the U.S. For every $1 of cocoa imported--- $1 to $2 For every $1 of cocoa imported--- $1 to $2

of other ingredients usedof other ingredients used

For yearly chocolate manufactureFor yearly chocolate manufacture • 1.5 million T of sugar1.5 million T of sugar• 650 million pounds of milk650 million pounds of milk• 25% of all US peanuts25% of all US peanuts

Cocoa Farmers and US Farmers are truly Cocoa Farmers and US Farmers are truly INTERDEPENDENTINTERDEPENDENT

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Areas of Focus in STCP

Promote farmer groups Promote farmer groups Improve market & trade systemsImprove market & trade systems Research & technology transferResearch & technology transfer Work with communitiesWork with communities Cocoa farm diversificationCocoa farm diversification

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Farmer Groups -- Results Group marketing of productsGroup marketing of products

• EXAMPLE.EXAMPLE. Group selling Group selling increases co-op price by 10 to 25% increases co-op price by 10 to 25% -- $470,000 in Cameroon in 2000/01-- $470,000 in Cameroon in 2000/01

Co-op managementCo-op management Availability of inputsAvailability of inputs

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Market and Trade--Results

Shift greater share of world price Shift greater share of world price to farmerto farmer• EXAMPLE:EXAMPLE: Sale timing improves Sale timing improves

truckload profit by $5,000truckload profit by $5,000

Establish tighter quality specsEstablish tighter quality specs

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Research & Tech Transfer Identify and increase high yield Identify and increase high yield

plant materialsplant materials

• Example:Example: 50,000 plants 50,000 plants distributed in Guineadistributed in Guinea

Biological control of Black PodBiological control of Black Pod

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Working with CommunitiesWorking with Communities Co-operative labor sensitizationCo-operative labor sensitization

• Example:Example: 15 co-ops sensitized to 15 co-ops sensitized to youth protectionyouth protection

Improve access to educationImprove access to education• TraditionalTraditional

• VocationalVocational Labor MonitoringLabor Monitoring

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Farm DiversificationFarm Diversification Identify new shade systems for Identify new shade systems for

cocoacocoa• Example:Example: Cameroon multi-crop Cameroon multi-crop

system shows both high profit & system shows both high profit & high biodiversityhigh biodiversity

Develop new shade speciesDevelop new shade species Systems for land rehabilitationSystems for land rehabilitation

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The Challenges AheadThe Challenges Ahead Streamline the supply chainStreamline the supply chain Policy changes Policy changes Investments in rural sectorInvestments in rural sector

• Improve social servicesImprove social services

• Telecommunications/computersTelecommunications/computers

• Farm/co-op creditFarm/co-op credit Cocoa as a reforestation cropCocoa as a reforestation crop