In Agribusiness, Cocoa is Sweeter than Chocolate

What’s sweeter than chocolate? To those in agribusiness, two big stories from this month suggest that it might be cocoa.

Demand and prices for cocoa are rapidly increasing, and reached an all time high in the US this year, coming to a record-breaking $3,000 a ton. This rapid increase is largely in part to a growing Asian population, whose sweet teeth grow with their populace.

“Everybody’s developing a taste for chocolate and cocoa-based products, so you’re seeing demand really ramp up in that part of the world,” said a vice-president at Chicago brokerage Price Futures Group, Jack Scoville, to The Globe and Mail. “Of course, Canadians can’t live without their daily fix of Hershey bars either.”

One of the big cocoa-stories this month comes from Singapore, where one of the top imports from the US is processed chocolate. Olam International, a leading Singaporean supplier of raw and processed agricultural products, announced plans to invest $61 million into a new cocoa processing plant in Indonesia, one of the largest producers of cocoa in the world. Looks like they want to ensure they have some cocoa closer to home.

“Olam’s decision to make a strategic move to establish a processing facility in Indonesia is based upon our long term investment in sourcing cocoa in the country and perfectly meets the requirements of Olam Cocoa’s strategy,” said Gerry Manley, Olam’s Managing Director & Global Head for Cocoa. “We strongly believe that we are entering a phase of exceptional growth in Asian demand, which will redefine the consumption trends for cocoa and the requirements for high quality products by our customers.”

And Olam isn’t the only one talking cocoa potential. The World Cocoa Foundation (WCF) has created a plan called “CocoaAction”, which was formed to ensure that producers in West Africa might take advantage of the emerging cocoa demand. The plan is an ambitious one, promising 300,000 jobs to farmers by 2020.

And to boot, it is supported by big names you know, like Mars Chocolate and Hershey. (This plan is of course advantageous for Mars Chocolate, which in 2009 committed to buying 100 percent certified sustainable cocoa by 2020.) The plan is intended to bring sustainable growth and jobs first to Côte d’Ivoire and Ghana, and then expand.

Given the increasing demand of cocoa and subsequent market reactions–not unlike the other booming markets like poultry, beef, dairy and other imports–these announcements of companies capitalizing on cocoa are most likely, just the first bite.

FEATURED PHOTO: John Loo/Flickr