Cocoa Brothers
Something crazy has happened in West Africa and it's to do with chocolate and cocoa and the chocolate companies do not want you to know about it.
Trust me.
Ghana and Ivory Coast have formed the chocolate avengers, the Cocoa Avengers. Two neighboring countries have signed a deal to coordinate their cocoa prices and I'm going to tell you all about it.
Pay attention.
Those two countries grow 60% of the world's cocoa.60.And for most of a century, they competed against each other to sell it. Here is how the system worked.
Cote d'Ivoire quotes a price. Ghana quotes a difference price. And a handful of international buyers who between them take about 90% of everything these two countries sell move their volume to whichever one comes down.
And both countries always came down. Every single time. The farmers absorbed the loss. The buyers kept the margin. The buyers weren't African. They were in the West. That was the business model.
Now, this isn't the first time this has happened because they first moved against it in 2018. Then again in 2019 came the living income differential.
$400 a ton straight to the farmer. And in June in Abidjan, it went further. A joint declaration to harmonize farmgate prices. One price, two countries, 60% of global supply.
I'll tell you this. When producers stop competing and start coordinating, the buyer loses leverage. That is OPEC.
That's the Avengers. OPEC doesn't represent oil-producing countries. OPEC sets the price and the world pays it.
Ghana and Cote d'Ivoire are building the OPEC of chocolate. Now, here is a part that almost nobody is going to cover.
Cocoa is not even indigenous to West Africa. The plant was introduced under colonialism by the same European powers who built the processing industry in their own cities.
The bean left Africa, margins stayed in Europe.
That's where the profit was. In the 1970s, cocoa was half the value of a chocolate bar. By the 1980s, it was 16%. Today, the farmer gets out 6%.
That June declaration that just happened is an attempt to rewrite a century of that architecture. Ghana and Cote d'Ivoire plan to invite Nigeria, Cameroon, and other producers into this framework. A true continental cocoa block.
So the law of commodity power is this. A seller who stands alone carries the buyer's price.
A seller who stands together sets the price. That's the way this works.
Now, enforcement is the hard part. And we know that because it already happened.
When the $400 premium came in, the industry paid it, then discounted something called the origin differential by $200 to $300 a ton, taking back with one hand what they gave with the other. Ghana's cocoa board called it a silent war on the farmer's premium. So the question for Ghana and Cote d'Ivoire is, will they hold? Because if they hold, prices will change.
Farmers' income will change. And 60 years of extraction will begin to reverse.
Those that have held the monopoly for so long will likely seek other means to continue to undercut the farmers to pursue a profit. Exploiting technology at he expense of public heath to make a a dollar. Most will continue to purchase with the expectation that it is actually safe to consume.
If only they did not have to buy cocoa from anywhere . Imagine if they could just make it them selves ……..
Wait what ?
Source: IG @_the_merc
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