The USDA published an update on the Peruvian supply this month after FAS Lima issued its first cocoa report in a number of years.
“Peru is becoming an important exporter of cocoa, currently ranked twelfth in the world. The country will probably be in the top ten in the upcoming years as it increases area planted and yields,” said the USDA’s update.
What’s the appeal?
Cocoa production in Peru is forecast to reach 70,000 metric tons (MT) for calendar year 2014 as high prices on the international market incentives farmers to grow cocoa and the domestic government encourages cocoa as an alternative crop to coca.
Cocoa bean exports for the year are set to rise 18% to reach 37,000 MT with the Netherlands, Germany and Belgium among the biggest buyers.
Peruvian cocoa on the global stage
Peru is the eighth largest global cocoa producer and accounts for 1.6% of the global supply, according to the International Cocoa Organization. The country’s forecasted production for cocoa year 2013/14 was 70,000 MT, making it Latin America’s third largest producer behind Brazil (205.000 MT) and Ecuador (200,000 MT).
“Peru has many advantages for producing cocoa, including good weather, sufficient land and a rich biodiversity that allows Peru to have seven out of ten cocoa families in the world,” said the USDA.
Peruvian chocolate market
There are some local chocolate factories in Peru, but the USDA said that domestic consumption was still low and consequently 90% of Peruvian cocoa is exported. However, said that the Peruvian government was trying to promote chocolate consumption with consumer exhibitions such as the ‘Salon del Cocoa y Chocolate’.
“An important hurdle these efforts have to overcome is consumer’s taste. Peruvians are not used to the bitterness of a 50 or 70% cocoa content in a chocolate bar.”
Euromonitor International has forecast a compound annual growth rate (CAGR) of 3% in retail value sales of chocolate confectionery in Peru between 2013 and 2018. It says the moderate growth is due to consumers turning to healthier products in the impulse market and also notes a correlation between hot weather spells and reduced chocolate consumption in the country.
According to the research firm, Nestlé is the market leader in Peru with a 37% market share due to the strength of its Sublime brand.
Small farm size challenge
However, the USDA noted challenges with small cocoa farm sizes in the country.
Peruvian cocoa is grown mainly on the Eastern slopes of the Andes by small-scale farmers with less than three hectares, who produce average yields of 0.8 MT per hectare. The USDA said the small farm size harmed the quality of the produce and yield potential.
“An efficient cocoa farm needs at least five hectares to be economically viable,” it said.
“Cocoa farms are usually located in remote areas accessible only through rough dirt roads, which in the rainy season are almost impossible to drive on. Sometimes farmers have to put their trucks on barges to cross rivers and get to a main road which drives commercialization costs up,” the report continued.
High international prices have inspired other South American countries to expand cocoa production. Columbia, for example is planning to replant 80,000 hectares of its cocoa acreage. However, Brazil, Latin America’s leading producer, expects cocoa production to fall 15.7% in the next 10 years.