As we now languish in the chocolate void between Valentine’s Day and Easter, it was with great sadness that I learned that the formation of the “Chocolate OPEC” (“COPEC”) by the Ivory Coast and Ghana, which together account for 60% of global cocoa production, is expected to cause the price of chocolate to increase significantly. While most commodities have experienced notable price declines with continued global trade concerns and the spread of Covid-19, cocoa prices have risen, spiking nearly 7% just in the first two weeks of 2020 alone. Cocoa is (obviously) the principal ingredient in chocolate.
Data: FactSet; Chart: Axios Visuals
Over the last five years, cocoa prices have swung wildly from highs around $3,400 per metric ton to lows of $1,800 just two years ago. While prices today are closer to $2,900, a few years ago “COPEC” initially considered instituting a price floor but later determined that adding a $400 per ton premium was more beneficial to cocoa farmers. The goal was to ensure that farmers would realize at least $1,800 per ton, which is challenging given the complexity of the supply chain with local government squatting right in the middle. According to the International Cocoa Organization, last year 4.8 million metric tons of cocoa were milled. The World Bank goes on to observe that 80% of all cocoa farmers, which equates to 4 million people, subsist on an income of $3 per day. Forty-five 141-pound bags of cocoa generate $3 to a farmer.
The chocolate industry is estimated to be over $107 billion. The National Confectioners Association estimated that $21.1 billion of chocolate was sold in the US last year (of the $34.5 billion of total candy sales). Global consumption rose 5.7% over the five years from 2012 – 2017. With premium craft chocolate bars now retailing for more than $8, one would to expect to see continued strong growth.
In fact, the industry has worked hard to promote the health benefits of dark chocolate with its cocktail of antioxidants that, in moderation, may prevent cardiac disease and type 2 diabetes, as well as being a mild sexual stimulant – true story. Obviously, in excess, chocolate is quite likely to be unhealthy. It is rich in caffeine (20 mg per 100 grams) and theobromine, which has several toxic side effects. It is believed that as earlier as 1750 B.C. Mexicans enjoyed chocolate drinks as a source of healthy nutrition. Undoubtedly, though, chocolate (and other refined sugars) have contributed directly to the fattening of Americans over the last half century.
In addition to weight gain, there are other elements of the chocolate industry which are unhealthy. “COPEC” is in part a response to the very difficult labor conditions and poor wages facing cocoa farmers. It is also an industry that is fraught with child labor issues, as it is estimated to “employ” upwards of 2 million children.
This is largely due to the intensity of developing this crop. It takes 3 – 5 years for a cacao tree (which grow cocoa beans) to begin to bear fruit. It takes 4,000 cocoa beans to produce one pound of chocolate (which is about 10 Hershey bars). One cacao tree can produce between 1 – 3 pounds of chocolate per year (or between 4 – 12k beans). This begins to put the scale of human labor required into proper context. With global climate change, producers in “COPEC” are worried about the ability for cacao trees to continue to be as productive so in 2010, after the cacao tree genome was sequenced, scientists started to bioengineer new strains of cacao trees.
There is another constituent which finds chocolate quite unhealthy: dogs. According to the American Society for the Prevention of Cruelty to Animals, there were 20,865 calls for something called “canine chocolate exposure” in 2018 (versus 33,486 calls for prescription pills). In fact, 11% of all calls to the ASPCA were for eating chocolate with the monthly rate doubling in December as dogs found their way to Advent calendars and other holiday gifts. It turns out that as little as 3.5 ounces of chocolate can kill a 20-pound dog. Each treatment cost approximately $450, mostly to induce vomiting.
And on the brighter side, there appears to be a very strong correlation for countries with high (excessive?) per capita chocolate consumption and the number of Nobel Laureates. Evidently, Switzerland has a high number of really smart but fat people jacked up on caffeine.
Mark your calendars: National Chocolate Day is November 29.