Cortez visits emperor Montezuma of Mexico...The rest is history.
Excerpt from Mahatma Gandhi's thoughts on the cocoa trade:
The condition of plantation workers in Africa continued to receive Gandhi's attention. He wrote: "In cocoa plantations, Negro workers are subjected to such inhuman treatment that if we witnessed it with our own eyes we would have no desire to drink cocoa. Volumes have been written on the tortures inflicted in these plantations." (Indian Opinion, March 8, 1913, CW, Vol 11, p. 483).
A couple of years earlier he had complained to his associate, H S L Polak, about "the abominable chocolate", calling it "that cursed product of devilish slave labour." [August 26, 1911, CW, Vol 96 (Supplementary Vol VI), p. 71].
At another place he had written during a voyage to England: " I also avoid tea and coffee as far as possible, since they are the produce of slave labour." (Indian Opinion, August 7, 1909, CW, Vol 9, pp. 277-8)
Sadly and tragically, a century later, cocoa farmers still labor under slavery conditions and chocolate is still "that cursed product of slave labour."
FIVE HUNDRED YEARS AFTER CORTEZ AND HIS CONQUISTADORES "DISCOVERED" COCOA IN THE NEW WORLD, THE EXPLOITATION AND ECONOMIC OPPRESSION OF COCOA FARMERS CONTINUES...
Background: Over 10 million small-scale cocoa farmers produce cocoa around the world which is used in the manufacture of chocolate. West Africa produces and exports over 70% of the world output. However, cocoa prices have been continually declining in real terms over the last century and do not reflect or take into account real production costs.
Cocoa prices are characterized by extreme volatility and - contrary to economic
laws that state that prices of commodities are determined by production costs and
not by the interaction between supply and demand - cocoa prices are set and
determined on the futures commodities markets of London and New York, exclusively based on speculative activity using forecasts of future supply and demand based on parameters such as weather, political climate, currency fluctuations, etc.
As a result the cocoa sector in West Africa is near-collapse and cocoa farmers have been thrown deeper into poverty while chocolate multinationals generate billions in profits...
Please find below a copy ofcorrespondence exchanged between
myself and both Dr. Jan Vingerhoets - Executive Director of the
International Cocoa Organization (ICCO) and with the Dr. Jean-Marc Anga - head of economics and statistics at the ICCO.
21 May, 2007
TO: DR. JAN VINGERHOETS
EXECUTIVE DIRECTOR
ICCO
LONDON, ENGLAND
Dear Dr. Jan Vingerhoets,
I am writing to you with reference to an inquiry sent to the ICCO (addressed to Mr. Jean-Marc Anga) 3 weeks ago (on March 01 & 03) with regards to market imbalances and other issues related to the cocoa economy, which, unfortunately, has remained unanswered to this day.
I feel that, at this point, I must point out that the observations and interrogations expressed in my inquiries were not meant as criticism towards those working within the ICCO. They were simply genuine objective observations and resulting interrogations meant to enable me to better understand missing variables in the complex cocoa economy equation for the purpose of my analysis and to allow me to better comprehend the crisis prevailing within the sector.
In response to my first email of inquiry with reference to my proposal of setting up a cocoa cartel among cocoa producing countries, Mr. Anga wrote that the mandate of the ICCO Secretariat is:
“ to administer the successive International Cocoa Agreements (ICA) signed by both groups of countries and that these Agreements will only aim to achieve a balanced position between supply and demand, and not favour one group to the detriment of the other. Our current mandate is therefore to recommend and to implement measures that would achieve a sustainable world economy with a balance between supply and demand.”
In view of the above, my question to Mr. Anga was:
Can you therefore please tell me what policies and mechanisms the ICCO has put in place to address and resolve this structural market imbalance and to stabilize cocoa prices at remunerative levels based on actual cost of production and in equilibrium with the market forces of supply and demand?
Furthermore, in its 2005-2006 annual report, the ICCO identifies
“cocoa prices, farmers’ income and export revenue” as one of its three defined mandate and priority areas for implementation of the current International Cocoa Agreement to achieve a “sustainable world cocoa economy”
The ICCO further states that:
"this priority area comprises all activities related to policies,
Programs and projects of direct and immediate relevance for cocoa prices, for cocoa farmer income and for the export revenues of the cocoa producing and exporting countries. This priority area refers to the “economic pillar” of a sustainable cocoa economy, aiming at increasing the income of cocoa farmers. This constitutes the major economic problem in the world cocoa economy”.
In view of the above, my question to Mr. Anga was:
Can you please provide information relating to specific “policies, programs and projects of direct and immediate relevance for cocoa prices, for cocoa
farmers income and for the export revenues of the cocoa producing and exporting countries” that the ICCO has put in place? .
ICA
PART FOUR: MARKET-RELATED PROVISIONS, CHAPTER VIII.
SUPPLY AND DEMAND, Article 34, Market Committee)
In Article 34 (Part Four), with reference to Supply
and Demand, the ICA states:
1. In order to contribute to the greatest possible
growth of the cocoa economy and the balanced
development of production and consumption so as to
secure a sustainable equilibrium between supply and
demand, the Council shall establish a Market
Committee composed of all exporting and importing
Members.
My observations:
Re: Section 1-3 of Article 34 relating to the
defined Role of the Market Committee
In section 1 of Article 34, it is strange to observe
that the role of the Market Committee is limited to
“reviewing trends and prospects” related to cocoa
production & consumption, stocks, prices, and to
“identify market imbalances…No provisions are made
for addressing, preventing and/or resolving market
imbalances.
In section 2-3 of Article 34, the Market Committee’s
role is again defined and restricted to “examining”
“forecasts” and other economic data on the global
cocoa sector provided by the Executive Director “for
illustrative purposes only…” No clear mandate is
given to the Market Committee to address, prevent
and/or resolve the root causes leading to medium and
long term structural market imbalances in order “ to
achieve and maintain equilibrium between supply and
demand at given level of real prices.”
In view of the above, my question to Mr. Anga was:
What policies and mechanisms has the Market Committee developed and implemented to address, prevent and/or resolve structural market imbalances
between supply and demand in the short, medium and long-term?
Unfortunately all of my above interrogations have remained unanswered to this day and my inquiry has been met by utmost silence by the ICCO. Hopefully you can shed some light into these interrogations, taking into account the nature and purpose of my inquiries as expressed above.
I have, nevertheless, carried out research on my own to find answers to the questions raised in my inquiries, using statistical data published by the ICCO. Ironically, however, the ICCO statistical evidence provides a different picture altogether from the official rhetoric preached by the ICA, the ICCO and Mr. Jean-Marc Anga. In fact, statistical data on supply & demand from 1998/99-2005/6 clearly reveal a long-term disequilibrium imbalance between supply and demand, resulting in structural over supply of cocoa on the world market.
World Stocks 1998-2006
Average: 1,418,000 MT
Average Demand: 3,094,000 MT
% of average Demand: 46%
Month supplies: 6 months
Stock increase from 1998 to 2006: 21%
Vicious trap cycle
We all know that large stocks translate into long-term price decline; As a result, farmers produce more cocoa to make up for the loss of income resulting from the initial price decline, which further increases both supply and world stocks, further reducing cocoa prices, and so on…, in conformity with King’s Law. This is a vicious trap cycle.
King’s Law
King’s Law of Demand states that a surplus/deficit in a commodity will lead to a proportionally greater decline/ increase respectively in the price of the said commodity relative to the surplus or deficit. (i.e. a surplus of 10% in the supply of cocoa will lead to a decline of more than 10% in the price of cocoa, and vice versa.) A study conducted by the FAO on the elasticity of price has estimated that a production surplus of 10% translates into a price decline of 24% and vice-versa.
Tragically, the evidence ( historical and current production policies – or lack of ) clearly suggest that cocoa producing countries have been unaware of and/or ignoring this Law, digging their own graves in the process…In fact they have been producing more and more cocoa over the years to make up for the loss in income resulting from constant and repeated declines in cocoa prices…and digging their own graves in the process! And there is no evidence to suggest that the ICCO has done anything to raise awareness of the workings of this Law among its cocoa producing member countries…I beg you to differ with this claim.
It is also unfortunate to observe that – 45 years after the creation of Copal in 1962 - cocoa producing countries have failed to effectively “coordinate their national production policies” to deal with medium and long-term market imbalances.
All subsequent attempts by cocoa producers – from the 1964 Copal’s Producers Agreement to the more recent 1996 Libreville Declaration, to the 2006 Abuja Declaration – to obtain stable and remunerative prices for cocoa exports have all failed because cocoa producers have brilliantly failed to address and resolve the root causes leading to low, unstable, unpredictable, declining and unremunerative cocoa prices and have been incapable of developing and implementing intelligent and coherent policies to resolve short, medium and long-term market imbalances leading to structural over supply of cocoa on the world market. And again, there is no evidence to suggest that the ICCO has done anything either to help its cocoa producing member countries to “ reach equilibrium between supply and demand” in conformity with ICCO’s stated objectives, since the creation of the ICCO 34 years ago…I beg you to differ with this claim.
Speculation
Cocoa prices characterized by extreme volatility and instability due to speculation.
We all know that large stocks are used for speculative activity on the futures commodities exchange markets of London and New York, which in turn set and determine prices of cocoa, based on PREVISIONS of future demand and supply relationship using various speculative parameters such as climate, political situation, currency fluctuations, etc., and thus do not reflect or take into account the real production costs of cocoa, taking into account the global Terms of Trade, inflation, currency fluctuations, etc.
Thus, contrary to economic laws that state that prices of commodities are set and determined by production costs and not by the interaction between supply and demand, cocoa prices are exclusively determined by speculative activity.
Prices of cocoa
As David Ricardo CLEARLY stated:
It is PRODUCTION COSTS, not the interaction between supply and demand that sets and determines prices of commodities.” ( David Ricardo, Principles of political economy and taxation).
Unfortunately, prices of cocoa do not follow this Law. Instead, prices of cocoa tend to follow…??? I must admit that I am incapable of understanding/grasping what economic Law cocoa prices currently obey to, as they decrease when it rains, increase when there is political tension, decrease/increase with currency fluctuations, etc…
We all know, however, that currently cocoa prices are EXCLUSIVELY set and determined by speculative activity on the futures market, resulting in extremely volatile, unstable and unremunerative prices of cocoa, which do not reflect or take into account REAL COSTS OF PRODUCTION.
“A situation where commodity exchange in Europe and America unduly influences the international cocoa price without consideration to cost of production is unacceptable.” President Obasanjo, All Africa Cocoa Summit 2006, Abuja.
Unsustainable economic system
The way the system is currently built and operating is NOT SUSTAINABLE, neither for the cocoa producing countries nor for the chocolate industry in the consuming countries.
Unstable, unpredictable, volatile, unremunerative and constantly declining REAL prices of cocoa, translate into enormous negative economic, social and potitical costs for cocoa producing countries who are highly dependent on cocoa export earnings, especially in West Africa.
Similarly, unstable, unpredictable, volatile, unremunerative and constantly declining Real prices of cocoa have direct negative consequences on the chocolate industry in consuming countries in terms of quality decline, production unpredictability and decline, ( which further increases the price), unstable and high prices, and constant threats to supply.
The mutual-interdependence of both cocoa producing/exporting countries and the chocolate industry in the consuming countries appears self-evident. Remunerative and stable cocoa prices will translate into stable prices, constant supply and good quality beans for the chocolate industry. Thus, speculative activities in the cocoa futures market currently benefits neither the producers nor the chocolate industry. It is quite the contrary!
The recent (absurd, desperate and self-defeating) FDA petition filed by the Chocolate Manufacturers’ Association to have cocoa butter replaced by partially hydrogenated oils, transfats, artificial sweeteners, and milk substitutes, is both a clear result and a clear indication of the unsustainability of the current cocoa industry/economy.
Thus, in view of the above observations, I feel that it is in the OBVIOUS and IMMEDIATE both self and mutual-interest of both cocoa producing countries and the chocolate industry in consuming countries to address and resolve the market imbalance leading to structural over supply so as to TRULY achieve a “ sustainable world cocoa economy” which will translate into stable and remunerative prices for cocoa producers, which in turn will lead to good quality, constant supply and stable prices for the chocolate industry, and at the same time resolve other crucial issues and threats facing the industry such as child slave labor in cocoa plantations.
As Mahatma Gandhi said: “rectify one angle of the square and the others automatically rectify themselves…”
Moral obligation
Last but not least, I strongly believe and feel that the chocolate industry has a MORAL OBLIGATION to help the weaker members within the cocoa industry (i.e. the producing countries/cocoa farmers).
Survival of the fittest is the law of the jungle.
Upliftment of the weakest is the Law of Humanity.
As Mahatma Gandhi rightly said:
“ You cannot build a non-violent society based on exploitation.
Exploitation is the essence of violence.
The extension of the law of non-violence in the domain of economics means nothing else than the introduction of moral values to be used as a factor in regulating international commerce.” Mahatma Gandhi.
Thank you for shedding some light into the above-formulated interrogations and for sharing your views & reflections on the above observations. I look forward to hearing back from you in the near future.
Truthfully,
Arya A. Tajdin
A seeker of Truth…
THE WORLD IS NOW TOO SMALL FOR ANYTHING BUT TRUTH…
COPY OF MR. VINGERHOETS’S RESPONSE TO MY EMAIL:
Jan Vingerhoets
Dear Mr.Tajdin,
I have instructed Dr. Anga to stop answering your long e-mails.
We are totally transparent and you can find all important information on our website.
The basic point is that we can not afford to have long discussions with interested individuals, as this would distract us from our work to try to improve the livelyhoods of the cocoa farmers.
So, from now on, we will not answer your e-mails.
Sincerely Yours,
Dr. Jan Vingerhoets
Executive Director ICCO
MY RESPONSE TO MR. VINGERHOETS’S EMAIL:
Mr. Vingerhoets,
In response to my email of inquiry dated 21 May addressed to you, you boldly write:
“ I have instructed Dr. Anga to stop answering your long e-mails; so, from now on, we will not answer your e-mails.” " We are totally transparent and you can find all important information on our website"
Frankly, I am not surprised of your instructions. Your categorical refusal to answer my inquiries CLEARLY reveals that you have a lot to hide…As far as the "transparent" information contained in your website is concerned, I am not sure we share the same definition of transparency... Furthermore, the information I have requested from the ICCO in my inquiries in nowhere available on your website.
However, elementary rules of courtesy and of professionalism dictate that you AT LEAST respond to correspondence that is addressed to you. You above statement/instructions CLEARLY reveal your blatant deficit in good manners and professionalism.
You further write:
“The basic point is that we can not afford to have long discussions with interested individuals, as this would distract us from our work to try
to improve the livelyhoods of the cocoa farmers.”
Again, both your claims contradict the rhetoric that you preach in your “official” literature (i.e. ICA, ICCO, website, etc.)
In fact, the following information published on your own website directly contradicts your statement that : “The basic point is that we can not afford to have long discussions with interested individuals…”
Extract of information published on the ICCO website
The International Cocoa Agreement of 2001 states that :
" The International Cocoa Organization shall act as a global information centre for the efficient collection, collation, exchange and dissemination of information on all factors relating to cocoa and cocoa products "
ICCO's objective is therefore to facilitate access to different information tools and cocoa experts that will help to solve any information request coming from the cocoa community.”
And you have the AUDACITY to further write:
“…as this would distract us from our work to try to improve the livelyhoods of the cocoa farmers.” ( note: spelling correction >
When in fact there is NO EMPIRICAL EVIDENCE to support that claim, and you have CATEGORICALLY REFUSED to answer questions in my inquiries relating to this very issue. Furthermore, beyond the DECEITFUL RHETORIC preached by the ICCO, the FACTS reveal a different story ( fortunately, numbers do not lie and are not deceitful…).
Based on the statistical data on supply and demand, stocks, prices, etc. collected and published by the ICCO itself ( a sample of which I have included in my inquiry ), I think that it is fair to say that the ICCO has in fact done NOTHING over the last 35 years since its creation to “ try to improve the livelihoods of the cocoa farmers,” contrary to your deceitful claim. On the contrary, I think it is fair to say – based on historical evidence and on statistical data, figures and facts) that the ICCO has done everything to deliberately promote, create and maintain a structural over supply of cocoa to secure an abundant and cheap supply of cocoa for the chocolate industry in consuming countries, at the expense of both cocoa producing countries and cocoa farmers. This is SO OBVIOUS, and statistical data published by the ICCO CLEARLY testify to this claim. Again I beg you to differ with this claim with FACTS AND FIGURES and not EMPTY DECEITFUL RHETORIC, because you are brilliantly failing to make your case and insulting my intelligence in the process!
Furthermore, the history of both the International Cocoa Agreements (ICA) and the ICCO over the last + 30 years also CLEARLY reveal a profoundly unfair and
biased position in favor of the chocolate industry in the consuming countries to the detriment of both cocoa producing/exporting countries and cocoa farmers, despite the ICCO’s deceitful rhetoric and "official" stated mission that it represents the interest of both cocoa producers and consumers alike in an effort to build a “sustainable world cocoa economy with a balance between supply and demand.”
I view of the above, I am therefore not surprised that you “have requested Mr. Anga to stop answering my long emails” since you cannot answer my questions without openly revealing your vicious and deceitful “game”. Thank you for making that very clear.
However, what is more mind-boggling and incomprehensible to me at this stage is WHY are the producing nations deliberately playing a deceitful game whose rules are CLEARLY biased in favor of the cocoa/chocolate industry in the consuming countries, which results in huge economic losses and social and political unstability for cocoa producing countries…???
Why have cocoa producing nations chosen to become members of an institution (ICCO) which CLEARLY and EXCLUSIVELY looks after the sole interest of consuming countries (i.e. the cocoa/chocolate industry in consuming countries) at the expense and to the detriment of cocoa producing nations??? They are actually paying for their own oppression!
Why do cocoa producing countries deliberately accept to dig their own graves…??? Is it a lack of understanding of basic elementary economic laws and of the workings of an inherently biased and deceitful mechanism that governs the cocoa trade exclusively in favor of consuming nations???
At this point, these questions remain an enigma…?
However, I wonder who I should feel more sorry for: the financially bankrupt cocoa farmers or the MORALLY BANKRUPT individuals who are living off and prospering from the massive exploitation of cocoa farmers?
Finally, please take note that your bad faith and lack of cooperation in finding a mutually-beneficial solution to the cocoa crisis will not deter or discourage me from pursuing this issue further. Of course, I am disappointed to witness your deficit in intelligence, professionalism and moral integrity. DR. in front of one’s name is evidently not a certification of intelligence and integrity. I only blame myself for assuming that you might respond intelligently to the objective/scientific economic arguments presented in my inquiries (i.e. mutual-interdependence/advantage of both parties) and that the “moral obligation” argument might strike a cord within you. Your email has proved that I was clearly wrong in my assumption.
Meanwhile, please note that I have stopped buying/eating chocolate altogether since I do not want to be a part of and to sustain an industry which is based and prospers on the foundation of massive human exploitation. Not doing so would make me a hypocrite in the strict sense of the word.
Finally, please note that I shall publish a copy of all the correspondence exchanged between us on my blog.
Final thoughts…
If you and those working within ICCO and the cocoa/chocolate industry ( all those living off/prospering from the cocoa trade) still intellectually fail to grasp or acknowledge the Truth contained in my reflections, than try judging them using your own conscience. ( hopefully you have one…).
Truthfully,
Arya A. Tajdin
A seeker of Truth…
THE WORLD IS NOW TOO SMALL FOR ANYTHING BUT TRUTH…
COPY OF INITIAL EMAILS OF INQUIRY SENT TO ICCO.
TO: INTERNATIONAL COCOA ORGANIZATION (ICCO)
LONDON, ENGLAND
RE: CRISIS WITHIN THE COCOA SECTOR
To whom this may concern,
I am writing to you with regards to the severe crisis prevailing within the cocoa sector
throughout cocoa producing nations. Please find below my both reflections and interrogations on this issue.
“ A well defined problem is half-resolved. (Einstein)
Source of the problem
STRUCTURAL OVER SUPPLY ( Supply > Demand )
Declining prices of cocoa on the world market
Vicious trap cycle
Structural oversupply of cocoa results in low and
declining prices of cocoa on the world market. To
make up for the loss in income resulting from the
initial price decline, farmers produce more cocoa, which
leads to a further excess supply of cocoa, further
reducing both world cocoa prices and farm gate prices, thus
further impoverishing and marginalizing both cocoa
farmers and cocoa producing and exporting nations.
This is a vicious trap cycle which MUST be broken.
The world)
World market, Ghana increased its production from
320,000 MT to 450,000 MT between 1996 and 2000. This led to
an excess supply of cocoa on the world market, with a
resulting further 40% decline in the price of
cocoa during the same period, in conformity with King's Law.
“Structural over supply in the commodity market lies
at the heart of global poverty and instability. (Brandt Report)
prices of cocoa resulting from structural over supply.
Eight countries produce over 90% of the cocoa in the world;
Ivory Coast is the largest producer and exporter of cocoa with
around 40%; Ghana (20%),Cameroon (5%) and Nigeria (5%)
produce around 30%; Thus, four countries in West Africa produce
and supply around 70% of cocoa in the world. The balance
is supplied by Indonesia (13%) and other countries in Asia and
in South America.
Thus, if these countries set up a cocoa cartel similar to the OPEC
oil cartel they could mutually-agree on cocoa production quotas and
set prices -based on actual cost of production- which will be mutually
beneficial to all cocoa producing farmers and countries.
According to the following analysis measuring the impact on cocoa
prices resulting from adopting an OPEC-like cartel strategy to increase
and stabilize cocoa prices:
“The top 3 producers make up about 74% of total world cocoa output.
If they agree to reduce by 25% their respective outputs, the ending stock
ratio should dive to about 23%, enough to propel the price to more
than $2000/ton. This translates to 75% more dollar proceeds in absolute
amount for them even after taking into account the 25% reduction compared
to what they are getting at the current $850/ton with their present output.”
Source: www.icco.org/questions/opec.htm
WHY THEN DO THE MAJOR COCOA PRODUCING COUNTRIES
DO NOT SET UP A COCOA CARTEL TO SET PRODUCTION
QUOTAS IN ORDER TO STABILIZE COCOA PRICES AT
REMUNERATIVE PRICES BASED ON ACTUAL COST OF PRODUCTION
AND IN EQUILIBRIUM WITH THE MARKET LAWS OF SUPPLY AND DEMAND?
Thank you for shedding some light into this
interrogation. I had sent you a copy of this inquiry
through your website 3 weeks ago, but unfortunately
I have not heard back from you to this day. Hoping
to hear back from you in the near future.
Best regards,
Arya A. Tajdin
Executive Director
Yajna Centre
Dar es salaam, Tanzania
RESPONSE FROM JEAN-MARC ANGA, HEAD OF STATISTICS AND ECONOMICS , ICCO.
Dear Mr. Arya Tajdin,
I apologize for our late reply to your emails. This
is due to the pressing commitments in which the ICCO Secretariat
is currently engaged.
In reply to your enquiry, I would like to indicate
the following:
One fundamental difference between OPEC and ICCO is
that while the former is composed only of Petroleum Exporting
Countries, the latter comprises both Producing Countries and Consuming
Countries of Cocoa. The mandate of the ICCO Secretariat is therefore to
administer the successive International Cocoa Agreements (ICA)
signed by both groups of countries and as you can imagine, these Agreements will only aim to achieve a balanced position between supply and demand, and not favour one group to the detriment of the other.
In addition, please note that the previous but two ICAs contained economic/interventionist provisions which allowed the ICCO Secretariat,
through its Buffer Stock, to intervene on the market to buy and sell
cocoa in order to prop up prices. However, this avenue failed for
reasons that would be too long to explain here.
Eventually, in the last two agreements, ICCO members decided to redefine
the strategic objectives of the ICAs to concentrate on more easily achievable objectives. Our current mandate is therefore to recommend and to implement measures that would achieve a sustainable world economy with a balance between supply and demand. As you will have gathered by now, this issue of cartel in the cocoa sector is well beyond the scope of the current International Cocoa Agreement that the ICCO Secretariat is in charge of administering.
For your information, there is an organization called The Cocoa producers' Alliance (CPA) based in Nigeria whose membership is made only of Cocoa Producing Countries. I am assuming that this organization would be better placed to deal with any initiative such as the one you are advocating. Please find below, the details of the CPA.
I thank you for your interest and concern for this issue and I hope you find the above information useful.
Yours sincerely
Dr. Jean-Marc ANGA
Head of Economics and Statistics Division
International Cocoa Organization
MY RESPONSE TO DR.ANGA:
Dear Mr. Jean-Marc Anga,
Thank you for replying to my inquiry despite your busy work schedule. I wish to briefly make the following comments with ref to your response.
1) Supply and Demand
In your response, you write that the mandate of the
ICCO Secretariat is “ to administer the successive
International Cocoa Agreements (ICA) signed by both
groups of countries…and that these Agreements will
only aim to achieve a balanced position between supply
and demand, and not favour one group to the detriment
of the other.”
However, according to my analysis, it is precisely the
lack of a “ balanced position between supply and
demand “ (i.e. Structural over supply) that seems to
be at the root cause of ruinously low world and
farm-gate cocoa prices, which directly penalizes cocoa
producers/exporters. As I pointed out in my email of
inquiry (with Ghana as an example), structural over
supply of cocoa translates into low and continuously
declining world and farm-gate prices of cocoa. To make
up for the loss in income resulting from the initial
price decline, farmers produce more cocoa, which leads
to a further excess supply of cocoa, further reducing
both world and farm-gate cocoa prices, thus further
impoverishing and marginalizing both cocoa
producing/exporting nations and cocoa farmers, in
conformity with King’s Law…This is a vicious trap
cycle which MUST be broken.
Question 1
Can you therefore please tell me what policies and
mechanisms the ICCO has put in place to address and
resolve this structural market imbalance and to
stabilize cocoa prices at remunerative levels based on
actual cost of production and in equilibrium with the
market forces of supply and demand?
2) Cocoa prices, farmers’ incomes and cocoa export
revenues.
In its 2005-2006 annual report, the ICCO identifies
“cocoa prices, farmers’ income and export revenue” as
one of its three defined mandate and priority areas
for implementation of the current International Cocoa
Agreement to achieve a “sustainable world cocoa
economy”
The ICCO further states that "this priority area
comprises all activities related to policies, programs
and projects of direct and immediate relevance for
cocoa prices, for cocoa farmer income and for the
export revenues of the cocoa producing and exporting
countries. This priority area refers to the “economic
pillar” of a sustainable cocoa economy, aiming at
increasing the income of cocoa farmers. This
constitutes the major economic problem in the world
cocoa economy”.
Question 2
Can you please provide information relating to
specific “policies, programs and projects of direct
and immediate relevance for cocoa prices, for cocoa
farmers income and for the export revenues of the
cocoa producing and exporting countries” that the ICCO
has put in place? .
3) Local Value addition
Increasing and stabilizing cocoa prices at
remunerative levels is a crucial necessary first step
to building a "sustainable world cocoa economy" but is
far from sufficient in itself; cocoa producing nations
must also process cocoa locally to ADD VALUE to it
-instead of exporting raw cocoa- so as to break free
from the dictate of the world market and to
significantly increase their earnings. Furthermore,
local value addition will create investment,
employment and will generate income within the sector,
thus creating economic growth. Local value-addition of
cocoa will provide employment and income for the local
inhabitants, thus effectively reducing poverty among
the local population. However, local value addition by
itself will not reduce poverty among the local
population, unless both the cocoa farmers are paid a
“fair” price for their cocoa which is calculated and
based on actual cost of production – taking into
account the global Terms of Trade, inflation, exchange
rate fluctuations, etc.- and the other economic actors
along the local supply chain- i.e. farm laborers,
factory workers, etc.- are paid “fair” wages and are
employed using non-exploitative labor practices;
Finally, the wealth generated from local value
addition of cocoa must be shared equitably among the
local actors working throughout the local supply
chain. Local value addition without distributional
justice will not reduce poverty in cocoa producing
nations.
Question 3
What policies has the ICCO developed/implemented to
favor the local-value addition of cocoa in producing
nations?
I thank you for shedding some light into these further
interrogations.
p.s. I had already sent a copy of my inquiry to the
Cocoa Producers' Alliance (COPAL) over a month ago.
Unfortunately, I have not heard back from them to this
day. I will, however, resend a copy to the Secretary
General - Mr. Hope Sona Ebai. Thank you for his email
contact.
Kind regards,
Arya A. Tajdin
Executive Director
Yajna Centre
Dear Mr.Jean-Marc Anga,
Please find below additional observations and interrogations with reference to the issue of market equilibrium and other related issues within the cocoa sector. I have gone through the 2001 ICA to find provisions relating to this crucial issue: ( PART FOUR: MARKET-RELATED PROVISIONS, CHAPTER VIII. SUPPLY AND DEMAND, Article 34, Market Committee)
In Article 34 (Part Four), with reference to Supply and Demand, the ICA states:
1. In order to contribute to the greatest possible growth of the cocoa economy and the balanced development of production and consumption so as to secure a sustainable equilibrium between supply and demand, the Council shall establish a Market Committee composed of all exporting and importing Members.
(Observation)
Re: Section 1-3 of Article 34 relating to the defined Role of the Market Committee
In section 1 of Article 34, it is strange to observe that the role of the Market Committee is limited to “reviewing trends and prospects” related to cocoa production & consumption, stocks, prices, and to “identify market imbalances…No provisions are made for addressing, preventing and/or resolving market imbalances.
In section 2-3 of Article 34, the Market Committee’s role is again defined and restricted to “examining” “forecasts” and other economic data on the global cocoa sector provided by the Executive Director “for illustrative purposes only…” No clear mandate is given to the Market Committee to address, prevent and/or resolve the root causes leading to medium and long term structural market imbalances in order “ to achieve and maintain equilibrium between supply and demand at given level of real prices.”
Question 1
What policies and mechanisms has the Market Committee developed and implemented to address, prevent and/or resolve structural market imbalances between supply and demand in the short, medium and long-term?
Interestingly, however, section 4 of article 34 states that: “ On the basis of these forecasts, and in order to deal with the problems of market imbalances in the medium and long term, the exporting Members may undertake to coordinate their national production policies.
Question 2
With reference to section 4, can you please tell me what specific actions exporting members have undertaken – on the basis of these forecasts – “ to coordinate their national production policies to deal with the problems of market imbalances in the medium and long term? ”
II. LOCAL VALUE ADDITION
(2001 ICA Stated Objectives)
The stated objectives of the Sixth International Cocoa Agreement are:
“To contribute to the strengthening of the national cocoa economies of Member Countries…& to contribute to a balanced development of the world cocoa economy in the interest of all Members through appropriate measures.”
Observations
Strangely, however, the 2001 ICA contains no provisions on policies to encourage the local value addition/ local processing of cocoa in cocoa producing countries. As I mentioned in my last email, increasing and stabilizing cocoa prices at remunerative levels is a crucial necessary first step
to building a "sustainable world cocoa economy" but is far from sufficient in itself; cocoa producing nations must also process cocoa locally to ADD VALUE to it -instead of exporting raw cocoa- so as to break free from the dictate of the world market and to significantly increase their earnings. Furthermore, local value addition will create investment, employment and will generate income within the sector, thus creating economic growth. Local value-addition of cocoa will provide employment and income for the local inhabitants, thus effectively reducing poverty among the local population, and thus “contribute to the strengthening of the national cocoa economies of Member Countries …and to a balanced development of the world cocoa economy in the interest of all Members.”
Question
How does the ICCO explain the absence of provisions and policies related to promoting local-value addition in cocoa producing countries in the 2001 ICA?
How does the ICCO plan to achieve its stated objective “to contribute to the strengthening of the national cocoa economies of Member countries…” while entirely ignoring and failing to address and promote local processing/value-addition of cocoa in cocoa producing/exporting countries?
I thank you for looking into my inquiries and for shedding some light into these interrogations. I look forward to your feedback.
Kind regards,
Arya A. Tajdin
Executive Director
Yajna Centre
Dar es Salaam, Tanzania
Note: Unfortunately, but not surprisingly, I never heard back from Dr. Anga. All of my above interrogations addressed to him remained unanswered.
As a result, I wrote to the Executive Director of the ICCO – Dr. Jan Vingerhoets – 3 weeks later to address my inquiries directly to him. Unfortunately, but not surprisingly, Dr. Vingerhoets also categorically refused to answer my inquiries. Please see copy of correspondence exchanged between myself and Dr. Vingerhoets on this blog. I welcome your comments/feedback. Thank you.
