Images which stuck in my memory from childhood were those of groundnut pyramids in the North, the rubber and palm oil plantations of the East and the Cocoa plantations of the Western parts of Nigeria. Among these, cocoa farming in Nigeria presents one of the best investment opportunities.
Cocoa was the mainstay of Nigerian economy before the oil boom. The moment oil was discovered, cocoa farming was abandoned as a serious source of the county’s revenue, leaving the opportunity for any would-be serious farmer to exploit. Gradually, the picture of our exploits in this cash crop production vanished into thin air.
Global Outlook
Cocoa is grown in Africa, Asia and the Latin America.
According to the World Cocoa Foundation, Africa accounts for the largest production among with 68 percent of global production to its credit.The major producing countries in Africa include Cameroon, Nigeria, Ghana and Cote d’Ivoire (Ivory Coast). Coincidentally, Cote d’Ivoire is the largest cocoa producing country in the world; accounting for 33 percent of global cocoa production.
Asia is second, having 17 percent share of global production. The countries in Asia and Oceania where cocoa is significantly grown are Papua New Guinea, Malaysia and Indonesia
The Americas account for just 15 percent. The countries are Colombia, Ecuador and Brazil.
Global production of cocoa increased from 4.3 million metric tons to about 4.8 million metric tons in 2012. Cocoa production estimates for 2013 showed that global production would decline to 3. 95 million metric tons while it would pick up in 2014 to 4.37 million metric tons. In the 2012 cocoa year, Africa produced 2.93 million metric tons and consequently accounted for 71.5 percent of the global production. Cote d’Ivoire maintained its dominant position with 1.48 million metric tons in production. Ghana was second with 879 thousand metric tons, Nigeria, 245 thousand metric tons, Cameroon, 207 thousand metric tons while other African countries collectively produced 113 thousand metric tons.
Global Demand
The demand for cocoa is very high due to its numerous uses. Organic cocoa and chocolate – as chocolate is reputed for its high-calorie food to boost energy; cocoa powder and confectioneries are among the various uses of cocoa which have strengthened itsdemand globally.
At about 1.5 percent of global production, certified organic cocoa accounts for a negligible portion of global cocoa production. However, the demand for it is on the rise as organic cocoa beans enjoy price premium of about 10 to 25 percent above the market price, ranging from $100 to $300 per ton. The International Cocoa Organisation (ICCO) has estimated that the organic cocoa is sourced from Madagascar, Tanzania, Uganda (Africa); Belize, Bolivia, Brazil, Costa Rica, Dominican Republic, El Salvador, Mexico.
According to Euromonitor International, the global sales of organic chocolate confectioneries would increase from $734 million in 2012 to $886 million in 2018, with an estimated growth rate of about 2-3 percent. The regions where chocolate sales are expected to record the highest growth are the Middle East, Africa, Latin America and North America. Cocoa World Foundation in 2011 listed the top ten countries with highest cocoa butter import as Germany, United States, Netherlands, Belgium, France, United Kingdom, Switzerland, Russia, Poland and Canada, in that order. Also, the countries with the highest cocoa powder and cake import are USA, Spain, France, Germany, Netherlands, Italy, Russia, Malaysia, China (Mainland) and Australia. With regards to cocoa paste import, the leading countries are Germany, France, Netherlands, Belgium, Russia, Poland, United States, Ukraine, China (Mainland) and Canada. Cocoa beans are traded on two world exchanges which are London (NYSE LIFFE-GBP) and New York (ICE-USD).
According to Zepol, the top 5 countries that exported cocoa butter, fat and oil to the United States under HTS Code 1804 in December 2014 were Indonesia- $16.47 million; Brazil- $12.68million; Malaysia- $10 million; Cote D’ Ivoire- $9.26 million; and Nigeria- $2.86 million. While USA exported the same items to Canada- $7.19 million; Germany- $112,000; Trinidad and Tobago- $29,680; Netherlands- $23,000 and Guyana- $15,442.
Available information suggests that cocoa marketing channels differ from region to region and from country to country. In some places, small scale traders buy cocoa beans directly from smallholder farmers. These small scale traders will later sell to wholesalers who will in turn, sell to exporters. In other climes, cocoa beans are sold directly by farmers’ cooperatives to wholesalers. Alternatively, farmers’ cooperatives could export the beans of their members to buyers overseas.
Two bodies have developed standard practices for determining cocoa grades globally. These are the Federation of Cocoa Commerce Limited (FCC) and the Cocoa Merchants’ Association of America Inc. (CMAA). The grades are good fermented cocoa beans and fair fermented cocoa beans.
Nigeria’s Domestic Value Chain
Cocoa remains Nigeria’s leading non-oil export earner. Eighteen states utilized 1,363.43 thousand hectares of land to produce 369.69 thousand metric tons in 2012 compared with 1,323.83 thousand hectares when 371.42 thousand metric tons were produced in 2011.
The cocoa value chain comprises a large number of intermediaries such as collectors, traders, exporters, processors and manufacturers. It involves growing, harvesting, fermenting and drying, marketing, packing and transporting, roasting and grinding, pressing, and chocolate making before getting to the consumers.
It is estimated that the exporting of raw cocoa attracts about $10bn, the export of chocolates worth $100 billion, while the total value of all finished goods made from cocoa is estimated to be as high as $200 billion a year. This shows the huge opportunities that await investors in the cocoa value chain.
Above all, the export of premium cocoa is at its lowest ebb in Nigeria whereas the global market for premium cocoa is rapidly expanding. It has also been found that returns on cocoa can be higher than some other cash crops.
The production of chocolates which is a by-product of cocoa constitutes a significant part of the cocoa value chain and this is barely developed in Nigeria. That is why globally, the largest cocoa processing country is the Netherlands, which handles about 13 percent of the global grinding. It may interest you to know that the Netherlands is not a major producing country.
Opportunities exist for cocoa grinding in Nigeria because the activity has not been explored by competition. In 2014/2015, the ICCO forecast that 20.8 percent of the global cocoa grinding will take place in Africa. That amounts to 877 thousand tons. From this volume, Cote d ‘Ivoire will process 540 thousand tons; Ghana, 240 thousand tons while Nigeria and other African cocoa producers will grind just 97 thousand tons. Specifically, Nigeria’s share of global cocoa grindings slightly increased from 40 thousand tons in 2012/13 season to 45 thousand tons in 2013/14 season. On the other hand, the global demand for grindings has increased by 19 percent from 3,522 thousand tons in 2005/06 farming season to 4,207 thousand tons in 2014/15 farming season.
Cocoa production is rising in Nigeria and considerable returns await investors who bet on the cocoa value chain. State Governments must resuscitate ailing cocoa plantations and partner with investors in their states. Also, Farmers must have access to improved seedlings from International Institute for Tropical Agriculture (IITA) and the Cocoa Research Institute for better yield. It is noteworthy that efforts are being made byinvestment houses like Sahel Capital in raising $33 million for lending to agric SMEs in Nigeria.
Yes,the Sleeping Beauty of Cocoa can be brought back.
Fikayo Owoeye writing from Lagos.
