Industry fortune-telling of a large cocoa shortfall in 2020 was a shrewd way to secure supply at low prices, but the latest deficit forecasts are nowhere near as gloomy.
Around 2010, industry players came together to predict a cocoa shortfall of 1m metric tons (MT) by 2020 with Mars, Barry Callebaut and Blommer Chocolate all making public announcements.
The headlines followed. “Chocolate could run out in 2020 due to worldwide shortage of cocoa,” cried UK tabloid the Daily Mirror last December.
ICCO: Around 100,000 MT
But at the World Cocoa Conference in Amsterdam last week, the International Cocoa Organization’s (ICCO’s) director of economics and statistics division Laurent Pipitone, said: “It doesn’t look like there’s such a big concern.”
The ICCO currently expects a 30,000 MT supply surplus for this season, but a deficit slightly less than 100,000 MT for the next crop year. Looking further, it estimates a deficit of around 100,000 MT in 2020.
“It’s mathematical impossible to have 1m deficit,” said Pipitone. “It’s not going to happen.”
Pipitone said unknown tree stocks and the age of trees in producing countries clouded any 2020 forecasts and it was still unclear how cocoa consumption in emerging markets would evolve.
Mars: ‘We still see a shortfall’
Speaking to ConfectioneryNews, Andy Harner, global cocoa vice president at Mars Chocolate, stood by the 1m MT figure.
“In terms of supply of cocoa, we definitely still see a shortfall.”
He said the 2020 forecast was based on how cocoa demand had historically grown 2-3% per year. If the figure was extrapolated up to 2020 and nothing was done to improve supply, it left a 1m MT shortfall.
Harner said it was hard to see where the additional million tons would come from given land constraints, pests and diseases and competing crops like palm and rubber.
Why give a figure?
So why did Mars and other industry players feel the need to communicate the 1m MT figure?
"We were one of the first ones to put that number out there and the reason we did that was because we wanted to make sure people saw it and knew it,” Harner said.
He said it was “naïve” to assume supply would continue to match demand due to a growing middle class, rising demand for arable land and population growth.The Mars manadded that stating the 1m MT gap had led to stakeholders acting together.
For its own purpose?
Jean-Marc Anga, executive director of the International Cocoa organization (ICCO), said that concern for future supply was legitimate, but voiced caution.
“Sometimes the industry may be tempted to amplify the prospect of a supply deficit for its own purpose,” he said. “From a strategic standpoint it would be right for them to anticipate an explosion of consumption in China.”
Isaac Gyamfi, director of Solidaridad Ghana, added: "It's a genuine forecast that's based on statistics. If you do the math you'll see there's a deficit...but we also do know that the industry is keeping huge stocks that they don't disclose and there could potentially not be that level of deficit."
Mars: Could be greater than 1m MT..
Mars’ Harner said: “We're not trying to create a market crash - we're not trying to create a market spike - neither of those situations is good for long term sustainability of cocoa.”
He added that demand for chocolate had been growing faster than the 3% levels per year at around 5-6% growth.
“So some people may dispute meeting the extra million ton, but you could maybe make a case that's even greater than that.”
If nothing was done
Jos De Loor, president of Cargill Cocoa & Chocolate, told us: “If nothing had been done we would have had a 1m MT shortfall.
He said the one million ton shortfall would not happen because either supply would respond to rising demand or demand would be lower than expected.
"The worst thing that can happen to cocoa is that we get a doubling in price for a certain number of years then we get massive plantings, everybody wants to be in cocoa farming...and you will get a massive oversupply."
'Let’s not be under any illusion'
Barry Callebaut’s vice president of cocoa sustainability Nicko Debenham said there had been a lot of money spent by the industry on cocoa sustainability over the last 10-15 years, but there still remained a significant deficit to tackle.
“The reason we want to help farmers is because we want to help ourselves – let’s not be under any illusion.”
He called on far more to be done to improve farmer’s access to finance and said that cocoa should be grown in tandem with other cash crops rather than in competition.