Food of the Gods
By Kwei Quartey
Foreign Policy in Focus
November 30, 2011
http://www.fpif.org/articles/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 19th 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.

___________________________________________

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