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15 March 2017
Without the cocoa farmers, there is no chocolate at all

By Peter Guest, Global Initiatives

For more than a decade, Muslimin has grown cocoa on one hectare of land in Sulawesi, Indonesia. It was, he says, a very good farm, but over the years has been beset by problems. Overuse of chemical fertilisers has damaged the soil, production is declining, and climate change has meant that once regular seasons are now unpredictable.

“In the early years, we could predict rain in certain months, as well as droughts,” he says. “There were always certain times when we had the rainy season and the dry season. For the last couple of years, sometimes the dry season is way too long, and then when the rainy season happens, it’s way too much, and it’s affecting our crop.”

For the past year, Muslimin has been receiving education under a programme, Cocoa Life, run by Swisscontact, Cargill and Mondelez, and his yields are now rising. “It’s very simple,” he says.  “If production is better, I have a better income.

Apart from a few large operators in Latin America, cocoa is not a plantation crop; between 80 to 90 per cent of global output is produced by smallholders, like Muslimin — most of whom live in the developing world. There is a direct line from consumers of chocolate and other cocoa products down to smallholders, many of whom are close to the global poverty line, despite the enormous scale of the world market for confectionary.

Fast-growing consumer markets in Asia, and China in particular, have driven demand for cocoa, and the world market has been in deficit for several years, pushing up the price of the commodity. The smallholder farmers upstream of the supply chain make only a tiny fraction of the profits, and often miss out on price rises in the wholesale market.

Muslimin, cocoa farmer in Sulawesi, Indonesia

Muslimin, cocoa farmer in Sulawesi, Indonesia

“We knew what was going on in the global price because our facilitators told us what was happening in the world. Unfortunately, on a local level, all these collectors insist on having a fixed price,” Muslimin says.

As demand has risen, small farmers have not been able to increase output, as many lack the financial resources to invest in new trees, inputs or techniques. In many places, their production has actually fallen, as trees age and yields drop.

In some growing regions farmers have been caught in a vicious cycle of low earnings and falling yields due to underinvestment in replanting. This increased their vulnerability to adverse weather events and pests, and many found that cocoa was no longer economically viable. Some switched crops, others migrated to cities to seek out alternative employment.

Future supply

The challenges faced by cocoa smallholders are not just an issue of development; they represent a major problem for the commodity’s larger buyers, who need reliable supplies of cocoa that is consistent in taste and quality. Seeing that they were storing up problems for the future, several have created substantial programmes that seek to improve farmers’ livelihoods.

“We believe that a vibrant supply chain is vital for the sustainability of the cocoa,” says Andi Sitti Asmayanti, Southeast Asia cocoa development manager at Mondelez International. “Without the cocoa farmers, there is no chocolate at all. Without the next generation of the cocoa, there is no cocoa. So we are involving ourselves directly into the supply chain, supporting the smallholder farmers to be able for them to be empowered by themselves, so they can increase their productivity, they can increase their income.”

Andi Sitti Asmayanti

Andi Sitti Asmayanti, Southeast Asia Cocoa Development Manager at Mondelez International

Cocoa Life takes a “holistic” approach to assisting farmers, including encouraging them to diversify their production to include other cash crops, so as to reduce their vulnerability to climate change or market volatility. The initiative incorporates youth programmes, education and training, with the intention of making cocoa farming economically attractive enough to keep farmers growing the crop, and to make sure the next generation does the same.

“The way that we see it,” Asmayanti says, “as long as the farmer still believes in cocoa, they are able to get the training and support from the public and private sector, then they will stay in cocoa.”

Building coalitions

One surprising aspect of the industry’s focus on smallholders is that it has brought together companies who, at the retail level, are fiercely competitive with one another.

Mars, for example, worked with the US Department of Agriculture to map the cocoa genome, then made it freely available to encourage breeders to look at the genetic markers for different traits, and to breed more productive, resilient plants.

“The approach has always been that whilst we are focusing on the science, the intention, the aim is to get it out as far and wide as possible,” says Fay Fay Choo, Mars’ Asia cocoa director. “We realised that as a company, we can’t do that alone. We have to do that with suppliers. We are happy to work with Nestlé, with Mondelez, we have to get this out as far and wide as we can as well.”

While Mars focuses on the science, the company hopes other partners will make progress in others, Choo says. “Obviously, we compete on certain areas, but if we find the next super-clone, if we find solutions that will fix the soil structure, you’ll want as many farmers to get that information as possible. That’s not competitive. The more farmers get it, we raise the tide of everyone doing it better.

“For us, the return on investment is if the whole tide rises, then we’ve got available cocoa from everyone, and that keeps prices at a reasonable level, and that means we can sell affordable chocolates to consumers. We are in the business of making affordable chocolates. We are not in the business of expensive, high-end chocolates. That drives our business reason to be. A lot of people ask: why do we do it? Where’s the return on investment for Mars. There’s not money to be made in clone material, but it does make a lot of sense.”

 

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