Food of the Gods

A prominent part of holiday festivities is chocolate, one of our most adored comfort foods. Chocolate is made from the beans (actually the seeds) of the pods that grow on the trunk and main branches of the cocoa plant. In a fitting tribute to the Mayan (and later the Aztec) belief in the divine origin of cocoa, Swedish scientist and father of modern plant taxonomy, Carolus Linnaeus, gave the cocoa tree the name Theobroma cacao. Theobroma is Greek for “food of the gods,” and cacao is derived from the Mayan word ka'kau.

As a boy growing up in Ghana, I once visited a hot, humid cocoa farm during a school field trip. One of the farmers deftly opened a cocoa pod with a machete and invited us to sample the succulent, sweet, but tangy white mucilage that covers the raw beans. Sub-Saharan Africa produces 70-74 percent of the world’s cocoa beans, 82 percent of which comes from Ghana and Côte d'Ivoire alone. Should anything wipe out the cocoa crop from either of these producer nations, there is no other country that could quickly step in to take up the slack.

In Ghana, the tradition of cocoa growing dates to the early 19^th century. According to the International Cocoa Organization, in 2009-2010 Ghanaian cocoa smallholders produced 696,000 tons of cocoa, while Côte d’Ivoire put out 1.4 million tons. Ghana, in its present zeal to beat the competition, has since turned up its production. In an August 26, 2011 press release, the Ghana Cocoa Board (also called “Cocobod”) announced that Ghana had yielded an unprecedented cocoa bean crop of 1.1 million tons for 2010-2011. Cocobod guarantees Ghanaian cocoa farmers a fixed price every year.

Fair trade

Socioeconomic benefits make a strong case for fair trade in cocoa farming and trading. But in the arena of cocoa pricing in Ghana at least, some have questioned the need for a certified “fair trade” cocoa buyer like the Kuapa Kokoo cooperative, which counts over 40,000 farmers among its members. Says Steven Wallace, the passionate CEO of The Omanhene Cocoa Bean Company whose superior-quality chocolate is made in Ghana and sold in the United States, “I’ve spent 20 years working within Ghana’s centralized cocoa system and it seems to me that there is no compelling reason for a third-party, fair trade minimum price scheme in Ghana, because such a system is redundant in a country that has for decades promised farmers a guaranteed floor price for cocoa.” Wallace, wary of western paternalism toward Africa, points out that Ghanaian cocoa nearly always trades at a premium due to its inherent quality, and that Ghana’s government often pays substantial bonuses to farmers when the world price is high.

One of the tenets of fair trade is a strict prohibition on child labor, a particularly emotion-laden topic. The 2001 Harkin-Engel Protocol (HEP) called for action by various stakeholders in the cocoa industry to address the Worst Forms of Child Labor (WFCL) in Côte d’Ivoire and Ghana. But by Valentine’s Day 2005, Senator Tom Harkin was expressing dismay that the chocolate industry had failed to implement a voluntary public certification system to eliminate WFCL in West Africa, particularly in Côte d’Ivoire.

Studies continue to show that the chocolate industry is dragging its feet in the implementation of the HEP. Judy Gearhart, Executive Director of the International Labor Rights Forum, states that the industry is simply “not committing all the resources” that it is capable of to eradicate WFCL. A September 2011 report called “Still Time to Raise the Bar” identifies the Hershey Company as the worst offender: “It is clear that Hershey remains a laggard in its industry on the important issue of child labor. Consumers, businesses, and legislators are increasingly embracing greater transparency and the reduction of labor abuses in supply chains. The most iconic chocolate company in the US — maker of Hershey’s Bars, Reese’s Peanut Butter Cups, and Hershey’s Kisses — is the lone holdout.”

A study by the Tulane University Payson Center, which assesses WFCL monitoring systems, has shown that “between 2001 and 2009, public and private stakeholders in Côte d’Ivoire and Ghana reached several thousand children in the cocoa-growing areas with remediation interventions including withdrawal, rehabilitation, reinsertion, education, and vocational training services.” In 2009, Ghana’s Deputy Minister for Employment and Social Welfare commented that although slavery-like practices in the country’s cocoa sector are not widespread, nonetheless “it is worrying to know that over 50 percent of children in cocoa growing communities engage in at least one hazardous activity which does not auger [sic] well for their health and education.” A 2008 International Labor Rights Forum article was highly critical of the stakeholders, particularly the chocolate industry, for not having fulfilled the goals of the Protocol.

Omanhene’s Steven Wallace agrees with the deputy minister that there is no widespread, systematic child slavery in Ghana. Having lived in Ghana, I too find it difficult to imagine. However, it’s a different story in Côte d’Ivoire, where, even though child trafficking is against the law under any circumstance, it still does occur from poverty-stricken Mali and Burkina Faso to Côte d’Ivoire, as shown in the moving film by Miki Mistrati, The Dark Side of Chocolate.

The differences with respect to child labor in Ghana and Côte d’Ivoire are largely due to how the two governments interact with multinational firms like Barry Callebaut, ADM, Nestlé, and Cargill. Côte d’Ivoire gets into bed with them, whereas Ghana firmly keeps them outside the bedroom door. An example of a sweetheart deal between Côte d’Ivoire’s government (ICG) and, say Cargill, might go something like this:

ICG: If you, Cargill, build a nice big factory in Abidjan and employ Ivorians, we will supply you with beans at the world price less 15 percent for the next 10 years. Oh, and while you’re at it, could you please add a little percentage to our personal Swiss bank accounts?

Cargill: It’s a deal. However, we reserve the right to import cocoa beans from elsewhere in case Côte d’Ivoire destabilizes and/or the Ivorian government collapses and/or the cocoa crop fails.

This kind of arrangement would provide an incentive to the Ivorian government to overproduce cocoa, consolidate land ownership, and promote large corporate farms at the expense of small, family farms. In contrast, Ghana continues to promote small landholdings. Large farms, which allow for the capture of economies of scale necessary to get beans to the factory at the 15-percent discount, are the classic setting for child labor abuses. Smallholder farms are not.

Machinations and Manipulations

In a global economic environment balanced in favor of the rich nations, the chocolate products of the giant companies Nestlé, Mars, Hershey, and Cadbury (and its parent company Kraft Foods) never really go down in cost, but the world price of cocoa beans can plummet at any time. The chocolate industry likes this. Happily for them, the market price for cocoa fell from $3,700 per metric ton in March 2011 to $2,700 in November 2011.

One way for chocolate companies like Mars to engineer these price drops is to foster competition between the producers. It’s music to corporate ears when Ghana declares it wants to beat Côte d’Ivoire in cocoa exports, and the chocolate companies are happy to help. So, while on its face it’s in the interest of Ghana and its cocoa farmers for Cadbury to spend $50 million over the next 10 years to improve Ghana’s cocoa production, or for Mars to fund research to sequence the cocoa genome (look out for Mars to claim it “owns” the genome), the companies are ultimately looking out for themselves.

There’s no end of schemes to profit from cocoa. In 2010, Armajaro, a London-based hedge fund that operates a cocoa-buying company in Ghana, bought 264,000 tons of cocoa in order to create a virtual shortage and drive up the price, after which it intended to sell its stocks at a huge profit. Alas for Armajaro, the best-laid plans went flat. Côte d’Ivoire came through with a bumper crop and sent cocoa prices in London diving by almost $1750 per ton. Lesson learned: be careful how and when you mess with the Food of the Gods.