Thu | Dec 7, 2023

Cocoa marketing still a thorny issue for growers

Large private producer enters dealer market

Published:Friday | June 30, 2023 | 1:33 AM

Cocoa industry players are once again complaining that they are forced to sell their beans to the Jamaican government, currently at less than half the market price, but the commodities regulator has a simple answer: growers should ‘step up’ and go...

Cocoa industry players are once again complaining that they are forced to sell their beans to the Jamaican government, currently at less than half the market price, but the commodities regulator has a simple answer: growers should ‘step up’ and go after dealer licences.

That would resolve the issue, according to Acting Director General of the Jamaica Agricultural Commodities Regulatory Authority, Peter Thompson, who said the government is only in the market because private operators have not stepped up.

However, at least one private producer has already done so.

Currently, farmers supply beans for export to the Export Division of the Ministry of Agriculture, Fisheries and Mining. And cocoa farmers have been whispering to the Financial Gleaner that the Export Division has them in a ‘chokehold’. It’s only paying them US$2 per kilogramme, or US$20 per box, for their crop, but then goes on to sell the beans for US$5 per kilogramme.

As such, their average take from their crop is 40 per cent of its value. But they want it to be more in line with the Ivory Coast, which pays 75 per cent.

Traders of cocoa beans require a dealer licence, but right now the only entities approved to export the crop are the Exports Division and Jamaica’s largest private grower, Batchelor’s Hall Estate.

However, JACRA says there is no bar on anyone obtaining a dealer’s licence. All it takes is following the guidelines in the commodities law, Thompson indicated.

“I believe that when the Cocoa Board divested commercial operations to the private sector, strong private-sector and farmer organisations could have taken it on, but they dropped to ball,” said the acting JACRA head, who was recently seconded to the agency to fill a vacancy.

“In order to save face, the government stepped in to assist with the purchase of cocoa … farmers’ groups should have taken on marketing and the intention is to gradually phase out when new players are identified. The government would love to come out of it fully,” he said.

But Desmond Jadusingh, who heads up Batchelor’s Hall Estate, says JACRA is wrong when it asserts that farmers can exert control over the marketing of their crop.

Batchelor’s Hall currently exports its own beans under licence, but Jadusingh charged that the laws relating to the cocoa sector are administered in an ad hoc manner, which serve to erode investor returns.

There are still many individuals who dry and process their own beans or purchase beans without a licence, he said, while noting that the regulations used to police the sector should be reviewed and improved for greater effectiveness.

Other industry sources charge that the Export Division itself does not satisfy the legal conditions required for a dealers’ licence, but was still issued with one.

The division controls 95 per cent of the export market, and is the purchasing agent for JACRA. It continues to offer a fixed price for cocoa beans, even after liberalisation of the sector, they said.

“No large investor will set up production with these constraints,” said one buyer in relation to the government’s dominance of cocoa marketing.

Up to six years ago, the marketing of commodities was centralised within the Jamaican government, but that changed for various markets when the sector was reformed and decentralised. The Ministry of Agriculture began to retreat from the commercial operations of coffee, cocoa, spices and coconut, including the divestment of assets.

But as it relates to cocoa, the sector has been in decline since its liberalisation.

Industry members, who did not want to be identified, insisted that the agriculture ministry had no business being involved in the marketing of cocoa, post-deregulation, and further complained that the government had criminalised the sale of the product to unlicensed traders.

Two decades ago, cocoa bean production was 2,500 metric tonnes per year. Now it’s just 500 tonnes, produced by about 6,000 registered growers, 90 per cent of whom are small farmers, JACRA said.

The regulator notes that problems affecting the cocoa sector include low plant density; low plant management/nutrition; low productivity’ ageing plants; disease, including frosty pod; rot and pests, and, Thompson added, “ageing producers, low investor interest, low youth participation, low return on investment, and insufficient living income for some producers”.

Growers added to that list, competition with imports, labour shortage and unsustainable farm-gate prices for their cocoa, and the structure of the cess payable to JACRA, which does not charge a fee for foreign bean imports, but does so for local bean exports.

Farm-gate prices are $3,000 per box. Farmers earn a maximum of $210,000 per cocoa plot, from which production costs must be deducted, says JACRA. Each plot has the potential to produce, annually, 40-70 boxes per acre, depending on the agriculture practices applied by the farmer.

The most recent data from Statin put the value of cocoa imports at US$12.45 million ($1.87 billion), while export data from JACRA shows that US$452,462 ($65 million) worth of beans were sold to foreign markets in the 2020 crop year. Export markets include France, the United Kingdom, Netherlands, United States, Canada and Japan, with Netherlands, Italy and Japan being among the newer purchasers.

A cocoa dealer’s licence is required for persons who produce, buy, or otherwise offer the beans for sale.

Dealers must also exhibit a farm or production capacity of at least 20 metric tonnes, or 2,000 boxes, of cocoa per year. Citing this criteria, critics say the Export Division doesn’t qualify for a licence as it is not a cocoa producer; it only buys from farmers.

Under the JACRA law passed in 2017, large, unlicensed farmers may face up to five years in prison and fines ranging up to $5 million.

Persons producing for themselves and their household at levels “too small for commercial significance” don’t need a licence.