In recent months, the cacao industry has faced new challenges causing a price rise. These challenges are intertwined and are largely influenced by environmental factors and market dynamics. To try to unwarp the complex situation we are in and understand the intricacies, we can start by looking at historical factors and today’s new changes.
The Cocoa Industry
Bringing the chocolate to every supermarket’s corner in the world today, making it a staple food for some, is a culture shaped by the world’s cocoa trade. The trade made it possible for chocolate to be no longer a luxury, but an impulse purchase today according to our research. However, it was largely built on the structural exploitation of labour and environment.
The mass cocoa bean production was first built on the triangular trade of slaves and commodities in the 17th and 18th century. Big companies harvested cocoa beans using the hands of slaves in the past, and we can still see a big portion of the production today is still done with the cost of poverty and communities’ wellbeing. The low price left nearly nothing to the farmers in big plantations, in fact, most cocoa growers only earn less than 80p per day.
The Impact
The low price and exploitation not only led to poverty, but also the wealth of the whole community and environment. The cocoa growers find it hard to make ends meet, let alone invest to enhance their wellbeing. Seventy per cent (70%) of cocoa bean production happens in West Africa, mainly Ivory Coast and Ghana, where illegal mining and deforestation are more common to supply the rising demand for chocolate in other parts of the world. Recently, Ghana’s Cocoa Board reported smuggling and illegal mining on farmlands which led to supply disruption. The rise in cocoa price reflects the co-dependency and vulnerability of the global supply chain.
Climate Change and EUDR
New challenges arise amid climate change that accounts for an 11% decrease in global cacao yield compared to last year. For Paccari, El Niño resulting extreme rainfalls led to a notable reduction in cacao harvests. For West Africa, the “Swollen Shoot Disease”, a tree disease, has led to a 15%-50% loss in harvest; while the Ivory Coast faces flooding and droughts. According to the International Cocoa Organization (ICCO), the shortage may widen due to the seasonal winds and climate.
EUDR, which stands for EU Deforestation Regulation, will come into effect in January 2025, driving progress to make the trade traceable. With the intention of halting deforestation, higher costs, possibility of excluding small farmers, different sources of supply and other new challenges may occur. Recent reports show how many companies are rushing and importing more cacao, coffee etc, to have more stock in Europe for when EUDR starts because they know that many of the sources aren’t going to be able to export their cacao from the 1st of January 2025. This pressure in demand is also contributing to higher farm gate prices of cacao.
How Long Will It Last?
The impact of these climatic changes is reflected in the cocoa futures market. At the end of May this year, Cocoa Futures in London surged to £6,835 per tonne, a significant rise from £3,439 at the beginning of the year. This sharp increase underscores the market’s reaction to the reduced supply and heightened demand.
The duration of the high price may vary significantly, ranging from 18 to 36 months, depending on the analysis method. Some sources suggest that this period could extend even further, potentially spanning up to 5 years.
Our Action and Your Action
Paccari Chocolate remains devoted in its mission to support small farmers and champion sustainable practices. Our commitment to the welfare of farming families and environmental stewardship has led to a necessary price adjustment. We will continue using high quality and organic ingredients with no compromises despite the challenge of rising costs.
We appreciate your support and your loyalty to Paccari will continue to navigate us through this storm. Your choice of Paccari Chocolate helps us sustain our mission and support our community.
Final thoughts
For decades cacao has been in a very low price, a price we think should not have been, and this made chocolate companies to profit from keeping farmers in poverty and keeping even until now practices of slavery and forced child labour in the cacao supply chain and chocolate industry.
Juan Andres Santelices, CEO of Paccari chocolates in the UK, and founder of Fair Business Alliance, tells us that he agrees with others that estimate that the sustainable price for farmers should have been, and should be today, not lower than US$7,500 per metric ton (MT), and not like the Fairtrade minimum price that is at US$2,400 / MT plus the Fairtrade premium of US$240 / MT.
At Paccari Chocolate we always have said this was too low and we always paid above that. Juan Andres says, “I hope organisations like Fairtrade International and their supporters do understand that keeping price low for the satisfaction of gaining volume from multinationals is not going in the right direction, it has not stopped the injustice and unfairness in the supply chain and it has contributed to the problems faced today. With consumers and customers saying they find the price too high, it’s clear to me that this is a result of them being used to cheap cacao and chocolate at the expenses of farmers kept in poverty, children trafficked and forced into work, deforestation and contamination of our soil and water sources, as biodiversity loss. This has to be stopped now and it’s an opportunity for change, we have the chance to change this broken supply chain, are you going to contribute?”
“I have a little hope that with this challenge / crisis we are presented today, everyone at the chocolate market will change for good. Consumers have to understand that cacao has its cost, that the colonial times should have gone already, that people and planet do come before profits and greed, that chocolate is not a staple food but a treat / luxury and we have to pay what is right for it, so that we can move quickly to a supply chain where never again we mention child labour, where never again we will have brands and players that are directly or indirectly related to slavery. In case you haven’t seen this list here it is, and you will be chocked to see some brands you thought were on the right side of history being some of the big offending chocolate companies, don’t get greenwashed by marketing.”
We all, consumers, retailers, distributors, industry, politicians and governments have the chance to change, it is in your hands to do it now. As Paccari chocolate we have been doing our best to be the best chocolate for the planet, leading the way as a South American chocolate family own company and we will continue do so with your support. Gracias!