Brazilian UTZ cocoa to satisfy industry commitments in S America, says Cargill

22-Jul-2013 - Last updated on 23-Jul-2013 at 13:14 GMT

Brazilian consumers largely unaware of ethical cocoa, but industry commitments will drive demand, says Cargill

Cargill has become the first to supply UTZ Certfied Cocoa from Brazil to help manufacturers realize sustainability commitments in the South American market.

The company, which has a plant in Ilhéus, Bahia, is now one of the few to supply certified cocoa from Brazil after helping farmers obtain UTZ certification.

Demand from manufacturers, not consumers

Rodrigo Melo, origination manager for Cargill in Brazil, told ConfectioneryNews: “The final consumer in Brazil is not very aware of sustainable production like in Europe. There is low awareness.”

However, he said demand was high among manufacturers that had made commitments to source more certified cocoa.

All major players including Hershey, Ferrero, Mondelez, Nestlé and Mars have pledged to source more certified cocoa – some, such as Hershey and Mars even intend to source their entire supply from certified sources by 2020.

According to Melo, there are only two other farms in Brazil producing certified cocoa, which are Rainforest Alliance farms.

The supply

Cargill has just begun helping Brazilian farmers gain UTZ certification under its sustainability project, Cocoa Promise.

So far, four farmers have been certified and yields of 1,000 MT are expected for the first year.

Within five years, the company aims to produce 5,000 MT of UTZ Certified cocoa per annum.

Brazil is a net importer of cocoa since there is not enough supply to satisfy domestic demand in the booming chocolate market.

One reason Cargill has embarked on the certification process is to boost domestic yields since certification programs often provide farmers training and access to tools to improve their productivity.

Cargill also works with Rainforest Alliance in West Africa, but Melo said that the UTZ label was chosen for Brazil because this particular certifier does a lot of work on improved agricultural practices.

Cargill expects the UTZ Certified farmers to increase their productivity by 30 to 50%, significantly improving their profits.

The price

Premiums for Cargill’s UTZ Certified cocoa will be around 10% of the market price, which varies according to the New York futures market.

The price for Brazilian cocoa was around $500 per MT higher than the NY futures market three years ago.

This premium for UTZ in Brazil is higher than a manufacturer would pay for certified cocoa from West Africa. But importing from West Africa is impractical due to logistic costs and import tariffs, making the overall cost equivalent to the price in Brazil.

Melo envisages that the Brazilian UTZ cocoa will be supplied to customers working in the South American market and little would go to North America.