27 June 2008

The cocoa story: part 1

I have come to Ghana to work on a project to raise the incomes of cocoa growers - already the motor of the rural economy here and in several neighbouring countries.

Ghana is the world's second-largest cocoa producer and three-quarters of a million farmers make a living from it. Unfortunately, their productivity levels are well below what is possible, even before you think about replacing the trees. Better crop management and judicious use of fertilizer can double yields in one or two years. So why hasn't it happened?

The biggest problem seems to be that most farmers can't get credit. Banks are unwilling to lend to farmers, for good reasons: repayment rates are low and there is little chance of seizing the farms to use as collateral, since most farmers don't have formal title to it. Microcredit isn't much help: the interest rates are too high and loan periods too short for agriculture.

West Africa still dominates the world market for cocoa, but Asian producers are making inroads with newer trees and much higher yields. Could cocoa go the way of coffee and oil palm, in which prices are set by cheap, high-volume production in Vietnam and Indonesia? The solution seems to be, at least in Ghana, in a flight to quality. The best soil and climate conditions, apparently. I predict that in 10 or 20 years, chocolate buyers will pay as much attention to questions of origin as wine and coffee buyers do now.

1 comment:

Nail Biter said...

I would think that if you talked to the micro-credit people you could get them to adjust their repayment rates. Try KIVA. Go TALK to them about this problem. They are in the development business. They should listen.