Chocolate Industry

The export of cocoa from China – derisory but symbolic

Sunday June 27, 2021/6 a.m. / By FDC Ltd / Header image credit:Gambia Eye

China has started exporting cocoa beans according to the Chinese Academy of Tropical Agricultural Sciences (CATAS) 5 and as reported by Chinese media. The first shipment of 500 kg, valued at around $ 3,600, was shipped to Belgium (the third largest importer of cocoa beans) in October 2020. To put the scale of the first batch of cocoa beans into perspective exports from China, Côte d’Ivoire and Ghana, accounting for 61.8% of total world production, produced 2,074 metric tonnes (MT) and 770 MT respectively in 2019/20. This puts 500kg at a paltry 0.01% of the world’s 4600MT cocoa bean production.

The crop was cultivated in the tropical township of Xinlong located in the island province of Hainan in southern China – the country’s only tropical rainforest and the northernmost location for cocoa cultivation in the world. CATAS researcher Hao Zhaoyun said that “cocoa is a raw material for making chocolate. With the growing demand for chocolates, Hainan has extended its cocoa plantation area and made inroads in technological development ”.

Geography vs technology

However, tropical rainforest covers a relatively small proportion of Hainan’s land mass (35,354 km2). This is nothing compared to the humid tropical forests of Côte d’Ivoire and Ghana estimated respectively at 212,000 km2 and 91,700 km2 according to the Food and Agriculture Organization of the United Nations (FAO) .6 Together , that’s about nine times the size of the tropical region of China.

Growing cocoa requires high temperatures, rainfall, humidity and millions of hectares of arable land to grow – conditions that are found in abundance in West and Central Africa. This geographic consideration presents the greatest limitation to the scale of China’s cocoa production. Its inability to significantly increase production means that it is impossible to compete with African cocoa farmers.

China might be unable to compete with African giants anytime soon, but the crucial lesson here is Chinese authorities’ stubborn determination to apply the technology to increase cocoa production. The breakthrough is more symbolic than the country’s prospects as a potential disruptor to the cocoa bean market. The quality of cocoa also determines its attractiveness on the world market. This means that if the Chinese variant is of higher quality, it could gain a competitive advantage and usurp market share (albeit less than substantial) from other players.

Nevertheless, the technological development itself usually has a cost which will be factored into the price of the product. Modifying cocoa beans to grow and thrive in non-tropical climatic conditions is not exactly to be ruled out in the medium to long term. It would be a masterstroke. Achieving this feat at a commercially viable cost would be a game-changer.

Technology to support productivity

Cocoa prices are expected to fall 4.3% in 2021 to an average of $ 2,286 / tonne, as global demand struggles to return amid COVID-19 and growing health awareness. Cocoa production is also expected to decline slightly due to a marginal drop in production by the world powers of Côte d’Ivoire and Ghana. Nigeria’s cocoa production forecast to drop to 235,000 tonnes in 2020/21, according to the Economist Intelligence Unit (EIU) due to difficulties in finding labor to harvest the crop and arrears of cocoa beans in warehouses.

It’s the second consecutive year of decline after production fell from 270,000 MT in 2018/19 to 250,000 MT in 2019/20, largely due to the inability of farmers to dry a significant portion of the harvest due to excessive rainfall in southwestern Nigeria. Black rot disease, which thrives in humid conditions, has also taken its toll on Nigeria’s cocoa production. While technology could still put China firmly on the cocoa map, the lack of technology adoption in Nigeria threatens to limit productivity and dampen production.

The inability to widely distribute high-yielding, early maturing varieties of cocoa plants to farmers is proving to be a major constraint as the technology has been available and has been for over a decade. This modified variant also has a greater degree of disease resistance while requiring less use of agrochemicals in its culture. Farmers have not adopted it or have no access to it – or both. The use of technology to increase productivity is crucial and will support the government’s goal of diversifying and deepening sources of foreign exchange income beyond oil and gas.

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Lessons from Ghana – Political will

The global chocolate industry is valued at over $ 150 billion.7 However, while West Africa accounts for around 70% of the cocoa bean supply, it receives less than $ 6 billion ( 4%) for his problems. This is consistent with the widely used model of exporting raw materials across the continent. In 2020, Ghanaian President Nana Addo Dankwa Akufo-Addo, during a speech in Switzerland, announced his intention to transform 50% of Ghana’s annual cocoa bean production in the country and end dependency with respect to the export of the raw material.8 Ghana is steadily increasing its primary cocoa processing capacity. However, most of the cocoa market income (80%) is generated at the secondary processing stage (making cocoa paste), which is dominated by Europeans and Asians. This is where the huge potential lies and where African cocoa bean producers need to invest. The Chinese could enter this market and compete favorably in the years to come. Given their reputation for research and development and rapid deployment of technology to reduce production costs, they could quickly corner the market.

Lessons from Cameroon – Untapped Potential Across the South

Finally, the Nigerian Ministry of Agriculture estimates that Nigerian cocoa bean production may exceed that of Côte d’Ivoire. It would have to be multiplied by nine for that to happen. As unlikely as it may sound, the potential for expanding cocoa cultivation is immense and remains untapped. Cameroon, once a marginal player, has made giant strides in recent years to enter the contention, overtaking Nigeria as the world’s fourth largest cocoa producer with an expected production of 280,000 tonnes in 2020/21. While Nigerian production is largely concentrated in the southwest region, the increase in Cameroonian production validates the idea that the entire southern region of Nigeria (especially the southeast which shares a border with Cameroon) should have cocoa yields as high as the southwest. This could lead to a quadrupling of Nigeria’s cocoa production and the ministry’s claim may not be as far-fetched as it sounds after all.

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