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Cocoa demand

Cacao Oro Nicaragua
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Cocoa demand

Global demand for cocoa grew at a compound annual rate of 2.7% from 1961 to 2014 and is expected to grow by 30%, or 5.2% CAGR by 2020. The historical growth of global demand was primarily a function of the growth of organic demand and, to a great extent, of GDP. However, the sector is undergoing structural changes in the long-term and demand is accelerating mainly as a result of the emerging middle classes in developing markets that have a discretionary income to buy luxury goods. This includes chocolate confectionery, which has been observed in countries such as China, India, and Brazil, among others.

Cocoa only grows effectively in the equatorial band, between approximately 20 degrees north and south latitudes. Cocoa, like many crops in the tropical belt, requires specific amounts of heat, relative humidity, and sufficient water (with relatively even distribution) to optimize production. These barriers limit the options of potential cocoa producers, making the acquisition of farmland difficult and typically expensive. In addition, government export prices and/or restrictions and underinvestment in infrastructure and equipment have often presented barriers to global development.


Cocoa in the world

Global demand

The Cocoa sector is experiencing long-term structural changes and demand is accelerating, mainly as a result of the emergence of the middle classes in developing markets that have a discretionary income to buy luxury goods.

Sustainability

The global demand from consumers for sustainable cocoa also impacts the supply chain, with major chocolate producers seeking a 100% sustainable supply-chain target by 2020. ICCO has noted that only between 10% and 12% of total production is sustainable today. However, projections indicate that this number will increase by about 50% by 2020.

Global challenges

There are between 5 and 6 million cocoa producers on plantations averaging less than 5 hectares in size, which leads to inefficient and fragmented production models. Globally, cocoa tree populations have already reached or exceeded their maximum productive lives and most plantations are in decline and need replanting.


Cacao commerce

The "bulk" or "commercial" cocoa that dominates the sector is traded primarily in international markets: New York (ICE - USD) and (LIFFE - GBP), while "fine" type cocoa is marketed in directly between producers or traders and end users on a negotiated basis. Because of cocoa's unique place in the food value chain and production characteristics, cocoa prices are largely uncorrelated with major cash crops and the spectrum of most other tropical crops.
Cocoa from sustainable producers delivering "fine" cocoa can be marketed at above bulk prices, but the classification is highly subjective in nature, which in turn causes a significant variation in premiums. Premiums are not formally recorded and may vary depending on demand, specific geographies within producer areas, and other factors. Premiums in the Latin American markets for sustainable, high-quality "fine" cocoa have reached $ 1,500 / MT, however, buyers of "fine" cocoa tend to be drawn from a narrow spectrum of smaller specialty manufacturers. Qualitative factors for fine cocoa are also a key factor behind pricing, resulting from the high degree of variability in taste resulting from the underlying morphology of plants, growth conditions and the quality of the fermentation and drying.