January 1998
Marc Maes
Will the European Union allow the use of cocoa butter substitutes? This question has been hanging over the cocoa market for years. If the use of cocoa butter substitutes increases, it will be at the expense of the revenues of the cocoa producing countries' revenues which are already low and insecure.
After many years of preparation, the European Commission finally published its proposal concerning the harmonisation of the European chocolate market in April 1996. The most controversial point in any effort to harmonise the market has been the use of vegetable fats other than cocoa butter in the manufacture of chocolate. The European Union used always to prohibit the use of cocoa butter substitutes. A temporary exception to this general rule was made for Great Britain, Ireland, and Denmark, which do allow such fats, when they joined the EEC in 1973 (European Directive 73/241/EEC). Three other countries permitting the use of vegetable fats joined the Union at a later stage: Sweden, Finland and Austria. Portugal changed its legislation after its entry to permit the use of substitutes. Basically, each of these latter four cases were infringements of the European regulations, in spite of the fact that the European Single Market has been effective since 1 January 1993. Given the situation that eight countries (71% of chocolate production) prohibit substitutes, while three countries permit them and four countries use them without permission, there is an urgent need for measures to be taken.
The problem is that the use of other vegetable fats reduces demand for cocoa. If in line with the earlier exception, all EU countries were to be allowed to replace 5% of cocoa butter by weight of chocolate, this would reduce the demand for cocoa beans by between 124,610 and 200,000 tonnes. If the United States follow suit, it is feared that losses for the cocoa-producing countries might run to between 208,410 and 325,000 tonnes. The International Cocoa Organisation in London has calculated that any reduction in demand of 10,000 tonnes equals a 1% loss of income for cocoa-producing countries. If the European Union allows harmonisation at 5%, the cocoa-producing countries will be faced with a drop of between 12.4 and 20% export receipts from cocoa.
However, the countries which already permit cocoa butter substitutes are not inclined to reverse the process. Both the vegetable fats industry and the chocolate industry are lobbying powerfully for harmonisation at 5%, the former hoping for a new market, the latter for cheaper raw materials. Moreover, the possibility of using non-cocoa fats reduces the chocolate manufacturers' dependence on cocoa and strengthens their control over the sector.
The proposal presented by the European Commission is a step towards more substitutes in chocolate: it suggests that the general ban on non-cocoa fats be lifted and that the decision as to whether or not to permit them be delegated to the member states themselves. The only restraint on the universal use of substitutes put forward by the Commission is to require an extra mention of the use of such fats on the packaging.
The Commission's proposal is yet to be approved by the European Parliament and the European Council of Ministers. If it is accepted, then it is feared that the powerful lobbies will succeed in convincing the member states one by one to permit the use of cocoa butter substitutes. The vague requirement of the extra mention on the packaging will not be sufficient to restrict the use of these fats. The cocoa-producing countries will become the victims of a European unification process which all too often involves harmonisation at the lowest level.
It is clear that the Commission's proposal goes against several legal obligations - to both European consumers and the cocoa producing countries - that the Commission has accepted. The International Cocoa Agreement, the Lom convention, and the Maastricht Treaty all oblige the Commission to take the interests of third world countries into account and even to take measures to increase the consumption of cocoa. The European consumers are entitled to labelling that leaves no room for confusion.
Permitting a certain level of cocoa butter substitutes in chocolate while there is no scientific method to establish the exact quantities that have been used also goes against the European policy of consumer protection.
In view of the importance of this issue for the cocoa producing countries, it comes as no surprise that the European Fair Trade Association (EFTA) has been campaigning against the use of cocoa butter substitutes in chocolate for several years. The position of EFTA is very clear. The EU chocolate market should be harmonised at 0% non-cocoa butter vegetable fats in chocolate. This is the only democratic solution that will guarantee the free circulation of chocolate products within the EU, will respect the EU's international obligations and will guarantee the protection of cocoa producing countries and peoples in West Africa and beyond. The movement is not against the use of vegetable fat other than cocoa butter in cocoa based products, but rather argues that if these fats are used, the cocoa product must not be allowed to be called 'chocolate'.
EFTA, along with other fair trade organisations, non governmental organisations, and other concerned groups has campaigned against the adoption of this proposed directive by organising petitions, post-card campaigns, demonstrations, round table discussions, press conferences and by distributing information to all political decision-makers and engaging them in debate. At least 500,000 citizens in all EU countries have responded to these campaigns and the EFTA position has been reflected in many political discussions of the issue to date.
The European plan to permit the use of cocoa butter substitutes comes at a time when cocoa prices are rising, but nevertheless remain very low. On one day in June 1992 the offer price for cocoa reached an all-time low of 830 US$ a tonne, while the annual average fell to US$ 1051. The price has recovered since then and is now fluctuating at around US$ 1400 to 1500, which, while a significant increase, cannot be called a magnificent price.
The graph shows the trends in cocoa prices since 1960-61, both in nominal and in real terms (i.e. with inflation taken into account). It is clear that the present price level is less than half that of the lowest prices in the 1960s and 1970s. Cocoa production was more profitable ten or even twenty years ago than it is today.
At first it seems quite odd that prices are not higher. Since 1991-92 there have been four seasons when the total crop fell short of demand. One would, of course, expect prices to be high if demand exceeds the supply. However, between demand and supply are the stocks. The accumulated stocks of cocoa exceed 1.25 million tonnes, which is 44.7% of total demand, enough to meet demand for five and a half months. As long as these vast stocks exist, the price will remain low.
These large stocks were created in the 1980s, when the harvests outstripped demand over a long period. Prices dropped sharply and the surpluses were added cheaply to the stocks of cocoa traders, processing industries and chocolate manufacturers.
The alternation of periods of surplus and deficit are typical for tree crops like cocoa. This is because cocoa production cannot easily be extended or reduced. In times of strong demand and high prices, the farmers can only respond in the short term by taking greater care of their trees. If demand remains strong, they will plant more cocoa trees, but it takes seven years for these new trees to start bearing fruit when surpluses can be expected to arise. These surpluses which cannot easily be reduced in the short term, have a depressing effect on prices. The low prices will lead farmers to put less effort into cultivation and will not replace old trees. This inevitably will result in renewed shortages.
That is exactly what happened in the 1970s and 1980s. The high prices in the mid-1970s caused an increase in production in the early 1980s. Prices dropped accordingly until they undermined production and eventually caused shortages in 1991-92. In the surplus and deficit cycle, cocoa producing countries come off worst: they cannot respond to higher prices quickly and can do too little to moderate a price decrease.
Something which producing countries cannot do but the consumer countries can is to keep stocks of cocoa. The production areas are too hot and too moist and lack the capital to finance cocoa stocks. The large stocks referred to above are therefore an instrument of power for the cocoa-consuming North rather than for the cocoa-producing South (see also under 'International Cocoa Agreement').
Whereas local processing of cocoa would strengthen the producing countries' position in the market, it also has a number of limitations. Not only does it require considerable know-how and adequate production levels, but it is also dependent on local cocoa supply, which is seasonal in character (for lack of storage) and limited in quality (processing industries in the North can blend different varieties). Other obstacles are the distance to the customer (both literally and figuratively) and the protective measures imposed by the industrialised countries (see later). Moreover, the cocoa market is not a free market, it is a closed market dominated by a few very large companies which are reluctant to let in small producers. Processing cocoa is one thing, finding a customer for the processed cocoa is another.
Processing in the cocoa-producing countries accounted for 30% of the total crop in 1975, a percentage which has not changed since. Brazil processes 200,000 tonnes, Ivory Coast 165,000 tonnes, Malaysia 100,000 tonnes, Ghana 75,000 tonnes and Indonesia 70,000 tonnes.
The cocoa plant needs a moist, hot and shady environment, as provided by a tropical forest. Cocoa grows in tropical areas in three continents. Latin America, the cradle of cocoa cultivation, still accounts for 20% of world production. West Africa, where it has been grown since the end of the nineteenth century, has developed into the main cocoa region, now accounting for 60% of world production. The youngest and fastest-growing region is South-East Asia, which has rapidly captured 20% of the cocoa market.
With a production of approximately one million tonnes, the Ivory Coast is the world's leading cocoa producer, followed by Ghana, Indonesia, Brazil, Nigeria, Malaysia and Cameroon. These seven countries between them produce 85% of the world's cocoa. Despite this high level of concentration, the producing countries are the weakest party in the cocoa sector. This is due to the problems connected with local storage and processing, so that a restriction of production is the only way for producing counties to exert any influence on the market. However, the countries with the strongest potential for growth have always refused to agree on common production restrictions (the Ivory Coast and Malaysia have often played this role in the past, today it is Indonesia).
West Africa Cocoa is of paramount importance to both the Ivory Coast and Ghana. Both countries rely heavily on cocoa for their foreign exchange, although it has lost some of its importance as a result of the price reduction of recent years. The sales revenue from cocoa still accounts for more than one third of Ghana's total export earnings and 40% of the total export earnings of Ivory Coast. Such dependence on a single commodity can prove disastrous when prices fall. Debt and interest on debt cannot be paid and there is little chance of improving the situation.
In West Africa, about 1.2 million small farmers' families earn a living by growing cocoa on farms with an average area of between 4 and 5 hectares. As the proceeds from the crop are crucial to the small farmers, they cultivate their cocoa trees most carefully and take great care with the harvest. Fermentation and drying of the beans is a labour-intensive process in West Africa. The pods are chopped open and the beans scraped out by hand. The beans, which are still white at this stage, are piled up and covered with banana leaves. There they stay for several days, undergoing a transformation during which they gain their brown colour and characteristic flavour. The beans are then spread on the ground, dried in the sun, stored and transported. The fermentation and drying processes are fundamental to good quality cocoa and, since in West Africa all this is done with the greatest possible care, it is here that the best quality cocoa is produced.
The cocoa from Nigeria and Cameroon has gone through a period of decline in recent years, in terms of both quality and quantity. Under pressure from the IMF and the World Bank, both countries were forced in the late 1980s to dismantle their state-owned cocoa enterprises and abolish their state monopolies. The abrupt liberalisation led to chaos and reduced quality control. This, along with the concern expressed by the entire cocoa sector, including traders and processors, has made the World Bank and the IMF more cautious and less hasty. In Ghana the sector is now being liberalised gradually. In the Ivory Coast the cocoa market will be completely free as from October 1999.
Malaysia and Indonesia came into cocoa production quite late. Encouraged by high prices in the 1970s, these countries stepped up production and are today among the leading cocoa producers. Together they hold about 20% of the world market. The cocoa is mainly grown on large plantations, involving hybrid varieties with high fertiliser and pesticide input. In Malaysia and Indonesia cocoa accounts for less than 1% of total export earnings.
Malaysia was the fastest-growing producer in the 1980s, but its production has decreased since the beginning of the 1990s. As a result of falling prices and rising wages, it is no longer profitable The large plantations are now replacing their cocoa trees with oil palms, whose cultivation is less labour-intensive. Gold Hope Plantations, for example, replaced 1943 ha of cocoa trees in 1995-96 alone. Since 1995, Malaysia has been importing cocoa from Indonesia to supply raw materials to its processing industry, which has a capacity of 110,000 tonnes.
In Indonesia wages are much lower than in Malaysia. Indonesia offers the combination of factors which, historically speaking, have always been determinants for booming cocoa production: virgin rain forest, a migrating population (from the overpopulated island of Java) and (connected) a sufficient number of people who have no choice but to accept a low level of income.
Rain forest is still being cut down in Sulawesi to give new settlers the opportunity to start cultivating cocoa. An estimated 400,000 hectares of Indonesia is now in cocoa production, and expectations are that Indonesia will soon surpass Ghana as the second largest cocoa producer. This determination to expand is at odds with the efforts of other cocoa-producing countries to stabilise prices by limiting production. The great expectations for Indonesian cocoa have been dampened to some extent in recent years due to the spread of the 'pod borer' moth, which has damaged the cocoa crop over large areas. Also, the quality of fermentation and drying processes leaves something to be desired.
The growth of the Asian market share was achieved mainly at the expense of Latin America. The biggest producer, Brazil, is faced with similar problems to those of Malaysia. Low prices and high wages make the cultivation of cocoa unprofitable, and the resulting neglect has led to a considerable spread of the witches broom disease, which has now affected extensive cocoa-producing areas. Whereas Brazil produced 309,000 tonnes of cocoa in 1992-93, only 165,000 tonnes of cocoa were expected in 1996-97. Like Malaysia, Brazil has now become an importer of cocoa in order to provide its processing industry with sufficient quantities of raw material.
In Brazil cocoa is grown mostly on plantations. The decline of the sector is a particular tragedy for the workers. In the province of Bahia, which is highly dependent on cocoa, over 250,000 out of a total of 450,000 jobs have already been lost. Other major cocoa producers in Latin America are Ecuador, Columbia, the Dominican Republic and Mexico. Cultivation in these countries is mainly in the hands of small-scale producers.
Trade restrictions are one reason why producer countries export cocoa mainly in the form of cocoa beans. The cocoa-consuming countries, i.e. the industrialised countries, protect their markets against imports of manufactured products by escalating tariffs. The higher the degree of manufacture, or degree of competitiveness, the higher the import tariff rate imposed. Until recently, the European Union raised a tariff of 3% on cocoa beans, as opposed to 12% on cocoa butter, 15% on cocoa liquor, and 16% on cocoa powder (cocoa butter and cocoa powder involve a higher degree of processing than cocoa mass, but European demand for powder is smaller). Products from ACP countries were granted free access. Other developing countries enjoyed a preferential tariff of 3% on beans, 11% on mass, 8% on butter and 9% on powder.
The 1994 GATT agreements resulted in new, lower tariffs. The standard tariffs are now: 1.5% for cocoa beans, 12% for cocoa liquor, 9% for cocoa butter and 12% for cocoa powder. The preferential tariffs for developing countries have been differentiated according to the so called "degree of development" of the countries involved. Ecuador and Bolivia can export their cocoa products freely; for Malaysia and Indonesia the tariffs are 0%, 8.4%, 6.3% and 4.2% respectively; for Brazil they are 0.7% for beans, 10.2% for liquor, 7.6% for butter and 8.2% for powder. Zero tariffs have been accorded to more countries. Besides the ACP-countries many countries from North Africa, the Middle East and Eastern Europe now have free access to the European market of cocoa products (with the exception of 1.5% tariff on beans). This means that the preferential treatment of ACP countries is not so preferential anymore.
In the commercial cocoa trade, the trading organisations and the chocolate industry receive about 70% of the profit from chocolate, whereas the cocoa farmers (who usually have no alternative source of income) receive barely 5%. The European fair trade organisations pay fair prices and support sustainable cultivation through establishing contacts with producers in developing countries. The sale of fair trade products also provides a link between producers and consumers. When consumers become more aware of the problems in the South in general, they will be more prepared to pay a fair price.
El Ceibo, a Bolivian cocoa co-operative, established contact with the Swiss organisation Claro in 1985. Part of the cocoa produced by El Ceibo is now sold directly by Claro on the European market. Intermediate traders are avoided and the first stages of processing are carried out in Bolivia. (El Ceibo produces both cocoa butter and cocoa powder in its simple processing plant). In 1991 Claro placed the first fair trade chocolate on the European market under the name 'Mascao'. It is produced by a Swiss chocolate manufacturer and initially consisted of fairly traded cocoa from El Ceibo and fairly traded cane-sugar from Alter Trade, a co-operative in the Philippines. Today, Mascao chocolate also contains muscovado sugar from Panay Fair Trade Centre in the Philippines and cocoa from Kuapa Kokoo in Ghana and Maquita Cushunsic Comercializando como Hermanos (MCCH) in Ecuador. Over 20 million Mascao chocolate bars have been sold to date.
Apart from Mascao, other types of chocolate and chocolate products have recently been introduced by most EFTA members: chocolate bars, instant cocoa powder, chocolate spread, chocolate covered nuts and raisins, and so on.
There has been a fair trade mark for chocolate in the Netherlands and Switzerland since 1993. Chocolate producers who import cocoa according to fair trade criteria may market their products with the Max Havelaar label. This offers regular retailers the opportunity to participate in fair trade and gives consumers better access to fairly traded products. Many supermarkets now sell both coffee and chocolate with the label. Cocoa for products with the Max Havelaar labels come from El Ceibo, Kuapa Kokoo, MCCH and the Toledo Cocoa Growers Association (TCGA) in Belize.
The labelling organisation TransFair introduced chocolate with the TransFair mark in Germany, Austria and Luxembourg in 1996. Great Britain has fair trade chocolate with the Fairtrade Mark.
The entire cocoa sector is characterised by a high degree of concentration. Seven countries represent 85% of cocoa production, five enterprises command 80% of the cocoa trade, five companies account for 70% of cocoa processing and six chocolate multinationals control 80% of the chocolate market. Of the six chocolate multinationals, three are American: Hershey, Mars, Philip Morris (owner of Kraft-Jacobs-Suchard-Cte d'Or) and three are European: Nestl (Switzerland), Cadbury-Schweppes (Great Britain) and Ferrero (Italy). There is stiff competition for new marketing opportunities between members of this group. These they seek to achieve by constantly developing new products with new shapes and tastes. Taking over smaller enterprises and their brands is another strategy to increase market share.
The chocolate manufacturers are basically the strongest parties in the cocoa business. They are less vulnerable to price changes, given their large product range and the fact that cocoa is only one of their ingredients. (Authorisation to replace cocoa butter with other fats would strengthen their position even further.)
Moreover, the large chocolate manufacturers spend such enormous amounts on advertising and brand familiarity that they have effectively dominated the distribution chains. Can any supermarket afford not to have Mars, Cadburys or Ferrero on its shelves? The manufacturers have capitalised on this strong position and increased their profit margins.
Concentration in the cocoa sector has arisen largely as a result of the concentration among the chocolate manufacturers who need large volumes of high quality cocoa at keen prices to enable them to produce their branded products. Traders and processors have had to meet these demands through increased economies of scale. (ref. 'The cocoa and chocolate market.' Rabobank, 1995)
Recent spectacular deals among the cocoa traders and processors include the take-over in 1996 of Cacao Barry by Callebaut and of Grace Cocoa by Archer-Daniels-Midland (ADM) who also bought the cocoa processing units of E.D.&F.MAN in 1997.
Cacao-Barry (France) was taken over by Callebaut (Belgium, but owned by Klaus Jacobs of Switzerland) for some US$ 390 million. Callebaut-Barry now processes 15% of world cocoa production and puts 600,000 tonnes of couverture (or industrial) chocolate on the market, accounting for 50% of total European production. In Great Britain, Callebaut-Barry controls as much as 90% of the couverture market.
The large American commodity trader Archer-Daniels-Midland bought the cocoa processor Grace Cocoa (also USA) for US$ 430 million (plus take-over of debts). Grace Cocoa grinds around 280,000 tonnes of cocoa beans, mainly in the Netherlands. The purchase of the cocoa processing units of the British commodity trader E.D.&F.Man in 1997 turned ADM into the largest cocoa processor in the world.
Every company take-over is followed by a restructuring or rationalisation process. Whatever it is called, it always involves many job losses.
Futures are traded at the commodity exchange as a sort of insurance against market fluctuations. Those who expect a rise or decline in prices buy an opposite contract in the futures market (this is called hedging). Speculators also buy and sell such futures. Speculators base their business on figures on the production and consumption of cocoa and chocolate. This in turn has led to another profitable business on the margin of the cocoa sector - the selling of such data.
The attractiveness of this business to speculators is demonstrated by the fact that the trade in cocoa futures exceeds the cocoa trade fourteen-fold. As a result, minor price fluctuations or rumours of shortages or surpluses are blown up out of all proportion. The presence of speculators at the commodity exchanges (nowadays including pension funds and investment trusts) further intensifies the price fluctuations. The cocoa market thus experienced two brief booms in 1995 and 1996. In one week in March 1997, under pressure from speculation about the size of the Ivory Coast crop, the price jumped from 1480 US$ per ton to 1565 US$. A sharp increase in June-July raised the price further to 1871 US$.
Several pieces of information caused this steep rise: rumours of a disappointing Ivory Coast crop, and about bad prospects for the following season; communications about the climatological phenomenon 'El Nino' which causes drought in the Southern hemisphere and possibly reduced cocoa production; information about the enormous stock of 500,000 tonnes that the commodity trader Phibro had built up and speculation about what he might do with it... . These provided an ideal cocktail for investment fund managers who quickly transferred large amounts of money from the declining coffee market to the advancing cocoa market. By the end of August profit-taking, rain and reassuring figures about the Ivory Coast crop brought the cocoa price back down to 1638 US$, but not yet to the 'normal' level, since questions about El Nino and Phibro remained unanswered.
Yah Paul lives in Binao, a small village in the western part of the Ivory Coast. He owns a small plot of land of about 100 metres by 150 metres, where he grows bananas and cocoa. Yah works hard and his plot still looks good, compared to those of his neighbours. Cultivating cocoa trees in the region is no longer profitable, since the national cocoa buying institution of the Ivory Coast, the Caisse de Stabilisation, cut the price for cocoa by half to 200 CFA Francs per kilo in 1990. Yah can no longer afford pesticides and fertilisers, and consequently the yield from his trees has decreased and he cannot pay school fees for his two daughters. At present he has no money at all, so he and his family have to survive on what will grow on the land around his hut - bananas and a few cassavas. Although there is a local co-operative, Yah has little choice but to sell the next cocoa crop to a middleman, a Lebanese businessman, who pays cash. The price the middleman pays is considerably lower than that of the co-operative, but Yah would have to wait longer for the money from the co-operative. Yah cannot afford to wait.
Gabriela sighs as she rakes the dry earth. If only it rained a bit, then the beans would grow and she would have some home-grown food again for herself and her six children.
Her husband, Antonio, left three months ago for the city of Salvador. He lost his job when that terrible fungal disease broke out on the cocoa plantation. The authorities ordered that all cocoa trees be chopped down to ensure eradication of the witches broom disease. This has ruled out a harvest for the next few years. And any work for Antonio.
She heard from others that Antonio had arrived in Salvador safely, but that he hadn't found work yet. He first has to find a job, then save for her trip to join him, and then find a place to live in one of the slums on the edge of the city. That is what they have agreed to do. Until then she will have to manage to subsist with their small plot and the little she earns as a washerwoman for the plantation manager. The kids have been chipping in a lot. Not the youngest ones of two and four years old, of course, but the other four, older children. They have been doing chores like fetching water from the stream, chopping wood, doing shopping for better-off villagers, and helping with the housework.
No, it's not easy to keep your head above water in these times of the Great Cocoa Crisis. Things have never been as bad as this in Bahia. It's quite understandable that many cocoa farmers and plantation owners have decided to turn their backs on the crop, and try to earn a living in different ways. Seven lean years in cocoa has just been too much to bear. Hopefully Antonio will soon find work, but then there are thousands like him seeking jobs. The countryside has emptied and the city has swollen...
The cocoa plant is actually a rather vulnerable species: bad weather and diseases may cause sharp ups and downs in both quantity and quality of the crop. The supplies on the world market can therefore fluctuate considerably and the prices change accordingly. Moreover, the supply of cocoa cannot be adjusted to the demand from one day to the next.
Both producers and consumers benefit from stable prices. That is why, since 1972, a number of International Cocoa Agreements (ICCAs) could be concluded with the primary aim of stabilising prices. The agreements imposed export quotas or production restrictions and created buffer stocks, managed by the International Cocoa Organisation (ICCO). During extreme upswings or downswings in prices, cocoa would be bought or sold from the buffer stocks. The buffer was funded jointly by consuming and producing countries. In the 1980s, the stabilisation system came under such pressure that it was abandoned in the latest International Cocoa Agreement of 1994. The cocoa prices had plummeted in the 1980s due to a structural production surplus. The rapid growth countries, i.e. the Ivory Coast and later Malaysia and Indonesia, had refused to join the system. The funds made available to finance the buffer stocks were insufficient. The stocks could therefore absorb only 250,000 tonnes, not enough to stop the downward trend in prices. Private traders, however, showed no shortage of funds. Their stocks had swollen to 1,328 million tonnes in 1990/91, or 67% of total demand! These giant stocks still affect the price level today. If cocoa prices are to be controlled, there must be better insight into the size of the stocks, their quality, their owners, their mobility etc. All available figures are rough estimates; the holders of stocks are reluctant to show their hands.
The most recent International Cocoa Agreement is a shadow of its former self, containing not a single intervention mechanism. The consumer countries have merely promised to promote consumption (i.e. no cocoa butter substitutes!); it is left to the producers to do something about the price by reducing production. Malaysia has now signed the Agreement, but Indonesia remains unwilling, and the USA has long stayed out of the Agreement. The buffer stocks are gradually being phased out. They have already shrunk to 26,000 tonnes and are supposed to have disappeared by March 1998.
Kuapa Kokoo, which means 'good cocoa farmers', is the name of an association of cocoa farmers in Ghana. When Ghana liberalised its domestic cocoa market in 1992 under pressure from the IMF and the World Bank, a number of farmers' leaders decided to establish their own cocoa trading company. The cocoa farmers had been deceived by corrupt officials for too long. They were not keen to exchange these officials for perhaps even worse intermediate traders.
The trading company Kuapa Kokoo Ltd. is owned by the Kuapa Kokoo Union. In every village, the farmers who supply to Kuapa Kokoo appoint their own board and representatives for Kuapa's administrative bodies. The cocoa farmers in Ghana have thus gained some control over the trade in their cash crop for the first time in many years. The fact that the farmers handle the scales themselves at Kuapa is an even more significant symbol of fair trade for them, than is the price they are paid. The farmers are paid for gathering, weighing and sacking the cocoa, and are involved in the management of Kuapa. They receive training, prompt payment and a bonus at the end of the season. Kuapa is the best performing organisation in Ghana's domestic cocoa market, with an ever growing number of farmers wanting to join. In 1993, Kuapa had 22 producer groups; a year later it had 49, and by 1997 there were 85 groups. The organisation foresees further growth in the next two or three years to between 120 and 130 groups.
