better pricing for better cacao

Today we had a group of cacao growers from Santo Domingo, Ecuador. The discussion was about how they get paid. Typically growers take their cacao to centers where they sell their cacao. They said that they get paid the same price for Nacional (fine aroma cacao), than they get paid for CCN-51, the clone that is taking over both Peru and Ecuador. It also doesn't matter whether they ferment their beans or not, or if they put monilla(rotten cacao) along with good cacao. What they are looking for is a partner in countries that process the cacao into chocolate and are willing to buy the good cacao for a higher price than CCN-51 or cacao that has not been selected.

As a group, we should find a solution for these farmers, we need to let them know that if they produce excellent cacao, they should get paid a higher price. That way the heirloom varieties can be preserved.

updated by @joseph-meza: 05/14/22 09:10:03PM

There's a disconnect with the breeders, the growers, and the buyers. Breeders are propagating for yield and disease resistance, and it's rare to meet a farmer who has even ever tasted chocolate. Breeders often don't understand that there are multi-dimensional variables that are important - although for some parts of industry, yield may be the most important (ie, if you're simply pressing it into cocoa powder for the powder - a high yield, low fat bean may be very important to you. flavor is less so if you're going to alkalize it anyway and create your own flavor). His experience is likely with Transmar, who - while they shouldn't be purchasing fungally infested beans - are not going to be overly discriminating from a quality standpoint. They're a volume player.

Create the demand or control the supply - it's really the only way it will happen.

Sebastian,

Cacau is sold by weight and the producers are striving to maximize this attribute. It makes little economic sense to produce organic beans for 10% premium (standard in Brazil), when the addition of fertilizer increases the quantity produced by 50%.

Your comments regarding "create the demand" has the most interesting impact. Unless buyers are willing to contract for an entire farm production, it is unlikely they will be in a position to dictate production techniques. In all cases, the producer is unable to produce 100% cacau of excellent quality. Disease, production processes and other factors influence quality. Will the buyer accept the "discards"?

The inescapable fact is, flavor is one of the least considered factors in producer earnings. In addition, 10% of cacau beans produced are absorbed by fine chocolate producers, the remainder goes to multinationals. Until high end chocolate producers accept the fact that premium beans are in fact "premium priced" there is a serious "log jam" I do not know a single producer that is interested in selling premium beans at any cost.

A solution for those interested in long term supplies of high quality beans is to invest in the farms and take an active role in its operations. Any takers?

Jim Lucas

as jim says, the only way to have growers interested in growing fine cacao, organic cacao, fermenting and drying, or doing anything other than low quality high volume, is to make it more profitable for them by paying a premium price for beans. and the only way to do that is to have a high end market to sell the higher priced beans into, as beans or as chocolate. so it requires a holistic approach with a strategy for moving the premium priced beans into the fine market at a profitable markup.

what jim says about the discards is very important. if i ask a farmer to sell me only his best beans, what does he do with the rest? the acopiador (middleman) who used to buy all his beans will not accept only his worst beans, or will pay an unattracticely low price. what we do to address this is buy the bad beans dry at the next harvest, at local market price, transport them along with the good beans, and mix them along with our flat and small discards from my post-harvest processing plant, and sell them to an acopiador. that way the farmer is happy andthe acopiador is satisfied. its not profitable for me but its not a loss either and the farmer is happy which is the most imporant thing.

saludos

brian

Having done this professionally for over 20 years, I have a fair bit of insight into what works and what doesn't, and have learned a thing or two about how systems work (or don't) in almost every origin. I'm familiar with the entire supply chain and the dynamics that are important at each of the steps - and they often are in conflict with one another. I know what motivates breeders, NGO's, farmers, middlemen, exporters, warehousers, the trade, and manufacturers.

I'm trying to say that I understand it better than most.

Hence the reason I stand by my statement that the only way to address what the original poster asked, is either

1) by creating sufficient supply demand as to 'pull' the specific requirements forward while simultaneously generating the volumes to allow product differentiation to provide an outlet for that material which does not meet the highest of standards (because it will always be there). Unfortunately, the small chocolate maker is not sufficiently coordinated to work closely with his/her peers to consolidate their demand, or they're more interested in flavor differentiation, thereby fragmenting the market and subsequently allowing for a continuation of the problem (now you have 100 buyers buying from 100 regions/farmers vs the 100 of them consolidating their purchases into a single farm, clearly identifying the post harvest parameters and handling requirements that will yield their requirements).

2) controlling the supply. buy your own farm and run it. very few can/want to do this. And you still must have product differentiation or accept low yields due to destruction of non-conforming product.

Jim's solution requires a minimum volume threshold to make it viable, both from the farmers perspective as well as logistically. Sure a chocolate producer can buy out a small farms volume, but the costs involved in getting the beans to the use will will result in a $20 chocolate bar. It works, and is the basis behind my #1 above. Prerequisite = volume. Form a purchasing co-op of sufficient volume to fill half containers minimum at a time, and provide a fiscal incentive for quality. Now you've reached critical mass.

Officially there is a premium for fine cacao, but in the field farmers are still powerless when they need their cash. I worked with a program in Ecuador that helped set cacao farmers associations, in order to get individuals working as a group, and this turn to be a great step towards getting better prices and conditions for their cacao. i know it is not easy to set up groups, and trust others but it seems to be the only way for small holders.

Lourdes,

What and where is a official premium paid for fine cacau? What is the value of the premium?

I have watched the formation and failure of dozens of farmer associations. The issue remains the basic price paid for cocoa beans. Until chocolate lovers accept the fact that cocoa producers are underpaid for the product.....a group of poor farmers working together do not change. THEY STILL REMAIN A GROUP OF POOR FARMERS. Adding the expense of coop administration to the already overburdened farm economics simply complicates individual budgets. There are success stories from various parts of the industry where small holders have banded together, normally short lived. The only success story that endures is of the big 5 multinationals that control the world market price. I wish it could be changed but it's not likely in the near future.

The cost of producing "premium fine" cocoa is much higher than "bulk beans", as individuals and as coops. If you have an example of a coop that has raised small holders from poverty to "middle class", please let me know and I will personally visit them in order to understand the process.

Best regards

Jim Lucas

Jim:

Perhaps you should also add to the list of criteria for your example .... a co-op that did not accept outside aid. Many of the purported benefits of "fair trade" certifications come about because some external group - some NGO or often USAID (especially in Peru) - covers both the upfront and on-going costs of certification.

When you eliminate outside aid from the equation you'll see that there are very few instances where it has happened from the grower up.

Sebastian brings up a very interesting point, which is that maybe it makes more sense for small chocolate makers to get together into a PURCHASING co-op rather than forcing the growers to organize. By doing so, the purchasing co-op drives larger volume purchases, which can start driving the critical mass of volume necessary to move away from commodity market pricing to specialty market quality, and the higher prices quality can command.

A purchasing co-op could also work to reduce the costs of transportation, one of the key limiters to supporting small specialty growers - there's never a full container.

--
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
clay - http://www.thechocolatelife.com/clay/

To be clear, there are huge advantages for the growers to cooperate as well, although it also brings another level of challenges. It is not a prerequisite to the OP's question; however demand volume is (well, synchronous demand volume is).

As I was driving back from the mtns today, I was looking for non-confidential examples that would be useful in helping illustrate the idea. Domori, Valhrona, Amedei, etc all are able to secure appropriate quality cocoa and keep their suppliers happy. How do you think that's done? In addition to working closely with them to maximize quality (ie minimize the defect stream), there's a captive volume at a mutually beneficial price. This approach could run into a number of potential issues - ie most chocolate mfrs don't know step 1 about cocoa quality or maximizing it; if they do have something they think is unique, there's likely to be a protectionist approach to guard their secret; there's a tendency to similarly guard your supply chain for fear of someone else 'stealing' your flavor.

Consolidating your purchasing power will require that these hurdles be cleared. A very frank assessment of which is more important will be needed.

I would enjoy talking more on this topic. My experience is also in the Dominican Republic and my in-laws are also members of a cooperative where they sell their wet or dry beans.

I think you will find most resistance in the DR coming from a single large entity, who also has deep ties to banking and shipping. Overcome that, consolidate a large enough purchasing base, and teach the farmers how to ferment (and dry...) appropriate to that purchasing base, and i think you've got upside there.

I am glad that there is good interest in this topic. My mail motivation for posting this was to try to come up with some solutions, mainly to the problem of the farmers not having more choices for selling their product, but also to find solutions for all the small chocolate makers that are beginning to appear everywhere.

Good quality cacao is hard to come by. Good post harvest practices are almost nonexistent in this part of Ecuador. Educating the farmers is key. The good thing is that they are willing to do whatever it takes to improve their product, as long as they are being compensated for doing so. The other good thing that is happening, at least in the US, is that customers realize that good quality has a premium price and they are willing to pay for it. Also I have noticed that my customers in the US care deeply about the farmers and that they get fair, or even generous compensation.

As a businessman, I also know that for me to support my employees and myself, I have to make a profit. So, customers have to be happy with the product that we provide, employees have to be happy with their work, suppliers have to be happy with their compensation. And we have to be happy with our compensation. A win, win, win, and win for all of us.

The beginning of the solutions has been expressed by your posts:

Sebastian said A solution for those interested in long term supplies of high quality beans is to invest in the farms and take an active role in its operations. Any takers?

Brian Horsley said as Jim says, the only way to have growers interested in growing fine cacao, organic cacao, fermenting and drying, or doing anything other than low quality high volume, is to make it more profitable for them by paying a premium price for beans. And the only way to do that is to have a high end market to sell the higher priced beans to

Clay Gordon states Sebastian brings up a very interesting point, which is that maybe it makes more sense for small chocolate makers to get together into a PURCHASING co-op rather than forcing the growers to organize. By doing so, the purchasing co-op drives larger volume purchases, which can start driving the critical mass of volume necessary to move away from commodity market pricing to specialty market quality, and the higher prices quality can command.

I would like to hear from some of the small or new chocolate makers and get their opinions.

This summer Dominican cacao farmers are earning US$145 for a 100 lbs. (quintal) of dried Sanchez beans. They earn about US$158 for fermented, Hispanola. I paid $190 for a quintal of dried Hispanola beans from a cooperative to make into paste. The tree type seems to be of little importance because the price is the same. What is a fair price for the farmer for premium beans? People in the campo tell me a tarea (X 6 to get an acre) produces from 1up to 3 quintales. Medium sized farms are usually between 300 and 1000 tareas and rarely their only source of income. Small parcels can be any size and many times managed by others due to the owners lives outside the country. So someone with 300 tareas (50 acres) of cacao probably has at least US$500,000 worth of land, and at least $45,000 in revenues a year and maybe $30,000 in cacao profits if it is Sanchez. You raise you revenues $4,000 minus additional costs by fermenting. Those of you who know more, please adjust or add to anything I have posted.

Few farmers have fermentation boxes and when they do ferment, it is with plastic tarps. In recent years, cooperatives and the larger buyers are purchasing the beans wet from the farmer and they do the fermentation. Not sure about how they price it.

I have not seen any incentive to produce higher quality beans for the farmer. Just produce more or maybe ferment. I am told there is an $800 differential per ton in premium cacao prices and the commodity price in the DR. If that is the case, that would the the $.40 difference per pound I paid at the cooperative. I do not know if individual farmers are getting more $$ for select beans or the cooperative takes the difference.

I'm not going to get into any financials, but think about what can be done from a marketing perspective to drive value. If the codex regulations set mold levels at 5%, differentiate your product by setting yours at 3% (you are purporting to deliver on flavor, right? if so, perhaps 1% mold by cut test should be the goal. or 0). Flavor is a tough thing to specify - how will you address that? Perhaps create a new class of beans - instead of ASE, you create a 'select' grading, using separate export bags with a unique logo to set it apart from the rest. The demand is there, the supply is there. It's just fragmented. People will pay for quality. Most people simply don't know what quality is.

The garbage beans should be thrown away. Just because it has become standard practice to mix the rotten beans in with the good beans and sell them, that doesn't mean it should continue to be done. One cacao farmer told me a few weeks ago that Europeans will not buy the rotten beans but Americans will. We pay more for the good beans that have no rotten beans mixed in and that's the way it should be. The farmer's feel better because they are selling a quality product and being paid well for it. They don't like selling rotten beans or CCN51 because they know it is an inferior product.

This is a fantastic discussion.

I am interested in working with both the farmer/cooperative as well as other smaller chocolate makers that would be interested in group purchasing. I would like to focus on beans from South and Central America with delivery to Seattle. Full (or at least half full) containers will result in transportation cost savings that could be used to offset the costs of distribution from Seattle as well as towards a quality premium for the beans/farmers.

I have had some discussions with a few smaller chocolate makers that may be interested in group purchasing, but have not gotten firm requirements (including quantities, specific qualities, etc.) or commitments (for quantities or money). Feel free to contact me again if those I have spoken to before are still interested.

If there were enough interest, it would be ideal to have several origins and deliveries throughout the year. This would help reduce storage costs for interested parties as well as diversify offerings (and reduce overall impacts associated with drops in availability from any one source).

Interested parties (i.e. farmer/cooperative and chocolate makers and not bean brokers, middle men, etc.) should feel free to reply and/or send me a message. Please indicate where you are located, if you are a farmer and/or buyer, what quantities of beans you are interested in/have available, and timing for those quantities (such as twice a year beginning in October, etc.) as well as what your requirements are (quality of beans, etc.).

Thanks

Some very interesting thoughts here. I definitely agree that very few people know how to differentiate between a poor quality bean and a high quality bean. There are so many factors that determine the final flavor.

However, there are a few people that have been travel the world looking for high quality beans. I have found many farmers that are already doing fermentation and drying themselves and are willing to "custom" ferment and dry for me. I have sources from several countries where I am doing this and I have tried to group purchase. As mentioned before, several fine chocolate makers do not want their sources known so it has been rather difficult getting the bigger players to cooperate. I definitely understand this. A friend of mine who makes very fine chocolate, had to stop putting the origins on his chocolate because, the next year, his prices would be higher due to the increased demand on an origin that he had made a name for. Once that happened, the producers, stopped the superior techniques they had implemented because their beans were going to be purchased one way or another and they no longer needed to spend the extra time and money making superior cacao.

it is a very difficult game and I am happy to see so many people trying to find solutions. I just got back from Venezuela and Ecuador where i met with a few farmers about processing some beans to my specs. However, I will be paying more than twice the typical amount they would get from the local coop so they are more than willing to spend the extra time and effort for me.

Enjoying the discussion, I can tell you that in Ecuador there are some farmers and several Asociaciones- the word used for co-op- that are getting a premium for their beans, which is around $450-500 per ton. Of course this is based on quality, and post-harvest process. It would be great if the fine chocolate makers get into a buyers coop, but it is great too that at the other end of the chain, the farmers negotiate as a group and see themselves as business people.

There are some inspiring cases, and I prefer to be an optimist and believe that they will resist problems and live for many years. One is the Kallari Asociacion, in the Amazonian province of Napo-Ecuador. They are 850 families producing Nacional beans, with a centralized collection center where fermentation and drying is properly done. Their beans are used by top chocolate makers in Europe. And to add value to their crops, they have decided to make their own chocolate.

I know them for many years and these days I distribute Kallari chocolate in the UK, and I have witness huge changes and improvements in their community. Of course there has been external support from foreign aid, the Ecuadorian government, and NGOs, but they started from scratch. It is a process.

Unfortunately, in Ecuador as any country producer of cocoa, the small farmer, be it rural poor, needy, trying to sell their cocoa when is baba (wet, fresh from the cob), because it needs and is always in need of money to cover their most urgent and obviously does not care that you choose their cocoa as this will decrease your income. Rarely given the job of fermenting (5 to 7 days) and even worse dry the grain, he needs money urgently, so that the acopiador(collector) from the nearest town buys it solely based on their degree of moisture-reducing price of course-which allows the farmer to have money for their most urgent expenses.. Such is the state of liquidity, often finds it expensive to buy pesticides for their high cost, forcing it to grow semi-organically, however which it can not be credited as an organic producer by the high costs of accreditation, making it reluctant to form partnerships with other peasants, because that means waiting longer for sale, and if the market demands high levels of quality, does not care if the grain is chosen or mixed.

No poor farmer has gone out of their poverty, partnering or cooperative, which is why everyone tries to survive as he can, that's what everybody knows, however from which cocoa is still buying the big multinationals, regardless of destination those who work the land, keep track of plants, care for and harvest their fruit, after which still prostrate in his misery.

The small Ecuadorian farmer, planted their cocoa, without being conscious of the unrivaled quality of the grain, because it knows that the world of fine cocoa aroma is highly priced, and whether they knew it, in its simplicity and humility would have no greater importance, he sees it simply as his means of livelihood.
To help the small farmer, it is first necessary to invest in training, seed selection, crop mechanization, but this means putting money in advance so that after a long period, see results. That does not interest any exporters or multinational, because it means fail to gain immediately by that investment.
In short, our poor farmers will remain in poverty despite being the creators of agricultural wealth, becoming victims of our famous globalization means to them a new chain of slavery.

It would be interesting to hear how guarantees for quality, processing specs, etc. are made binding, so that whoever is buying knows they're getting what they've paid for. I bring this point up because it is difficult, if not nearly impossible, to control post-harvest activities of a farmer or even more so farmers-in the case of a coop or association-here in Ecuador. People will make promises, will tell you this or that can be done, but when it comes to the final product, how would/could a buyer or buyers coop insist and ensure they are getting the quality they want? I know that offering better pricing is an incentive, but it's not a guarantee. With the lack of transparency in the trade here, as well as no clear standards for grading beans across the board (both in Ecuador and internationally) how do you ensure your quality standards are being met?
updated by @jeff-stern: 07/31/15 09:21:16AM

Repeat business. If you don't deliver what you agreed to, there won't be a 2nd order. The trade model used today by large folks wouldn't work for this, as i'd previously noted it would require a partnership (education on quality, how to get there, etc) which means working closely with a fixed group, and having mutually beneficial terms. Does it guarantee there will never be problems? Absolutely not - i guarantee there will. However, it certainly will be better than how 80% approach it today 8-) The other 20% already have figured this out.

Ivan thanks for your response. However you paint a very grim picture of the state of the farmers in Ecuador. You are right to certain extent, but the majority of farmers that I have met are much more optimistic and informed. They also see the big picture, if they change some of their practices, they can improve their lot. Not all are living from hand to mouth.

What we have to realize here is that as producers of chocolate (I consider myself a very small producer) we are looking for the best cacao we can find. We cant all grow our own cacao. Over 90% of cacao is grown in small lots 1 to 2 hectares, by individual farmers. That is the reality. They can grow exceptional cacao if given the chance, but it wont happen unless they earn more for their troubles. I have met with them, seen their farms, they want to change.

I am also in a very unique position; I have a place in Ecuador. I do all my post harvest process in Ecuador in my property. I buy the cacao en baba and ferment and dry on my site. I also show the farmers how they can do the fermentation and drying. At this time I dont trust anyone to ferment and dry for me, but that can change.

Just like cacao is produced in very small lots, the small chocolate maker is making some of the best chocolate. The small chocolate maker or craft chocolate maker doesnt really know where to buy their cacao. However they know a few things that they want. They want good quality cacao, they want organic cacao, and they want to know that the farmer is being compensated fairly; they are smart enough to know if the supply chain breaks somewhere, the cacao will cease to come.

Some of the larger craft chocolate makers have invested in finding the right farmers and buying a large portion of their harvest. Also they educate those farmers and give them parameters that they have to meet. Others have found a good supplier that they trust.

The world of chocolate is changing and fast. The demand for good chocolate is very strong. All that is needed is to tweak things a little.

Unfortunately, if we want to be objective, we must make the case for most small farmers of cocoa, of course there are small groups trying to get ahead based on improving both its production and handling of it, but I'm talking about the vast majority of those that both their economic and intellectual, not allowed to use these mechanisms.

As I said earlier, the involvement of exporters and multinational chocolate manufacturers in improving the techniques of planting and harvesting cocoa, more permeated with the farmer training, logically supported by investment and recognition of higher prices, are the guidelines to be followed to achieve a better cocoa bean quality is obtained and the farmers to improve their living conditions.

I am currently working with cocoa growers' association interested in improving their production, making longer periods of fermentation and technicians, which might achieve the aroma and taste that requires a quality cocoa, but that can only be achieved by paying more their product, supporting them in their projects, since otherwise much work to achieve the same market prices only serve to discourage and allow everything to remain as before. I think here is the opportunity to start work as discussed in this forum, that people or companies that buy cocoa back to look at these people, allowing payment by a more just and financial support for their projects, the vindication of their aspirations and this is the beginning of a more equitable relationship between producer and manufacturer, because most people want to get their land to produce more at the expense of the quality of cocoa, as the price is the same.

Those wishing to have a permanent high quality grain in time, paying a price that will encourage the farmer can contact me for my coordination and agreements, to get from Ecuador, under my warranty, quality cocoa that will benefit both the producer and the manufacturer.

This is the first step we must take if we want any change in the future.

Very interesting discussion. I run a cacao post-harvest processing and export center in southern Belize that is focused around ethical, direct trade and connecting specialty chocolate companies to smallholder farmers. We were founded basically to address the problem this forum has been addressing through the lens of social enterprise.

We seek to establish direct relationships between chocolate companies that deeply value the work of cacao farmers and the farmers themselves, allowing for an exceptionally high-quality product and a growing source of quality income for the farmers. We're just entering our second year of operation, but if you're interested in checking us out visit: mohocacao.tumblr.com. We are working with a solid line-up of specialty chocolate makers that have a sincere interest in connecting with cacao farmers. I'd be happy to chat directly with anyone who wants to learn more, and I'd also love to hear from anyone else doing a similar thing in other countries--

Cheers,

Emily

emily[at]mohocacao.com

Emily, I am so glad that someone else is doing what I want to do. I am in Ecuador. Me and my wife have a chocolate company( we make chocolate) it is called Mindo Chocolate Makers. Recently I have focused on trying to help the small farmers by finding small chocolate makers that are interested in using extremely good cacao. I want to train the farmers to do the fermentation and drying. We want to do an inspection after they are done with the dry cacao. They are only using the Nacional variety. The idea is to have the chocolate makers meet the farmers and start a relationship that would be beneficial to both of them. We in turn would qualify the beans and set up the shipping to the US via ocean boats. If enough chocolate makers can be found we can ship one container at the time. Containers are usually 20 tons. I have met with many farmers so far, they are all interested. So as far as the farmers are concerned, there are enough of them.

If there are any chocolate makers out there that may be interested, please email me. Joemeza117@gmail.com

Very nice, working toward the same in the Dominican Republic. I like the website.

Joseph hope to meet with you soon in Mindo. I am working within an ethical and direct trade model, and there is a lot of work to be done in this area. A huge potential as well. Glad to know there are more of us around.

Thanks Thomas! Best of luck with your work in the DR. Where in the DR are you focused?

Joseph and Lourdes glad to hear you are doing great things in Ecuador. I look forward to learning more. It is great to be connected with folks taking on similar projects!

I am working with an area where my wife was born named Jaya, near San Francisco de Macoris. I worked in the area up the mountain from Loma de Jaya to La Colonia in the Peace Corps in the late 80's mostly working with solar electricity. I also work with another women cooperative in Los Naranjos near Castillo which was my original Peace Corps site. Both or making chocolate paste, marmalade, cacao wine, and working toward bonbons and other products.

That's a beautiful area - I'm there fairly regularly. Perhaps we'll cross paths sometime!