The Times: Cacao Requires a New Model

Cocoa supplies come mainly from smallholder farmers, but this model cannot scale up fast enough when necessary. A different system is required to meet the ever-increasing demand, says grower United Cacao

Your favourite chocolate bar would be nothing without cocoa. This ingredient is central to a rapidly growing global market, and the system that produces the crop is undergoing a revolution.

United Cacao Limited SEZC is the only publicly listed dedicated cocoa grower and producer globally. The company is developing a freehold land bank of 3,760 hectares zoned for agricultural purposes in the northern Peruvian state of Loreto, primarily for the production of ethically grown and fully traceable high quality cocoa beans.

The business aims to set the global standard for large-scale cocoa production to match the sustained growth in demand for chocolate confectionery and cocoa-related products. Rising middle class populations in the large developing economies are driving consumption growth at a reported rate of 6 per cent plus per annum, and global chocolate confectionery sales are estimated at £79bn a year.

Inefficient smallholder farmers, who are responsible for approximately 90 per cent of global production, are poorly equipped to meet the anticipated demand growth. The global traders, processors and chocolate confectionery brand owners are therefore balanced precariously atop a system of simple agriculture that has changed little since the 19th century. The growing probability of an ongoing structural deficit in supply has supported prices above US$1,500/mt since 2001.

While there is strong ongoing commitment to, and support for, traditional smallholder suppliers from the leading confectionery brands and processors, these farmers will struggle to grow output at the required rate. The directors of United Cacao have created a new agro-industrial model to provide a clear path for sustainable, ethically produced and fully traceable cocoa supply to reach the world marketplace.

United Cacao chose the Loreto state of Peru for growing cocoa for specific reasons. The region provides an excellent climate and growing conditions for the crop – Loreto receives rainfall of between 2,500mm and 3,000mm per annum, with no dry season. Importantly the Peruvian legal system also provides foreign entities with the right to acquire freehold Peruvian land zoned for agriculture. The land forming the company’s plantations was titled in 1997 and intended for immediate development into agriculture. The company purchased its land parcels from individual private vendors in the Iquitos and Tamshiyacu areas.

The company is proud to be one of the leading agricultural employers in the Iquitos region. Its estates currently provide employment to around 500 people in an area of extreme poverty and drug trafficking and that number will rise as the plantation develops over time. United Cacao recently launched a small farmer programme, Programa Alianza Producción Estratégica Cacao (Cacao Production Strategic Alliance Program or Papec), to assist hundreds of local residents to become successful growers of cocoa. Papec was officially initiated on 17 April 2015 at a ceremony in Tamshiyacu. The company also maintains active community programmes focused on health and education. A community centre was recently opened which includes a Papec seedling nursery, children’s playground, two football pitches and clean water pumping station for the town.

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