Renaissance of the Caribbean Fine Cocoa Sector

In recent months there has been significant activity, including foreign interest, in the local cocoa sector which at one stage in its illustrious history exported over 2,000 tonnes of fine cocoa per annum to the world, attracting the premium prices associated with fine-flavoured cocoa.
Although Jamaica is still categorised by UNCTAD as one of a few countries in the world exclusively producing such fine cocoa the volumes of cocoa produced have been in decline for several years – at well under 1,000 tonnes per annum.

Why this is the case - even though world cocoa prices have been very attractive for producers over the past decade - may be attributed to several well researched issues. Space does not permit us to detail these reasons here. However what is certain is that the need for change has been recognised by the Cocoa Industry Board (CIB) and now several actions are well underway to address these underlying issues. A key facilitator of the revitalisation change process by the CIB was the securing of approximately 600,000 euros of European funding (under the EUBSP programme) for a 2 year project to implement interventions in the Jamaican cocoa value-chain to address the main short-comings.

Vernon Barrett, an international business consultant, is an Associate on the EU project. He has studied the business model of the cocoa sector both in Jamaica and in Trinidad is keen to ensure that the cocoa sector’s issues are properly understood from a commercial perspective in order for the correct solutions be developed and pursued. He states “The truth is that each country’s cocoa sector operates in a unique manner with inherent strengths and weaknesses and so problems and shortcomings have to be resolved in the relevant local context”.
“There is a lot of cocoa technical and agricultural know-how being bandied around but little documentation exists about the commercial models that made cocoa a viable agricultural sector once in the 1950-70’s. However if one looks at the current state of the industry infrastructure, reads historical accounts and interviews people from those heydays, it becomes clear as to how and why we are where we are with such a weakened industry sector and what is needed to turn it around in the near term. Equally it becomes apparent that any hasty change to the current cocoa industry model – such as any proposed carte blanche rapid liberalization – will kill off the ‘sick patient’ status of this sector” he warns.

The Cocoa Sector in Jamaica was conceived as a centralised processing operation with a few large fermentaries (with dryers) positioned strategically across the island. Initially four in number there are now only 2 in operation and even these do not operate at anywhere near full capacity. Being centralised they offered good economies of scale, provided the cocoa yields and production levels were as required to maximise the utilisation factor demanded by such large investment in the electric drying equipment. More importantly perhaps the quality of the final dried cocoa beans, almost all exported, could be easily controlled and managed cost-effectively.
Although the value-add processes of fermenting and drying were centralised the supply of raw cocoa beans was distributed across thousands, even tens of thousands, of small farmers. There were only a few large farms growing cocoa – unlike say what pertained in the Trinidad Cocoa Sector and elsewhere in other countries. Furthermore, in order to manage this widely distributed cocoa sourcing, a well functioning network structure across the rural areas – community based and socially beneficial – was required.

Vernon explains “The commercial success of the cocoa industry model in Jamaica depended on an unwritten contract between the small farmers growing the cocoa and the Cocoa Industry Board that ran the fermentaries, and this reflected the inter-dependency between the two parties. The small cocoa farmers were needed by the Cocoa Board to provide raw wet cocoa in significant volumes in a timely manner at regular intervals in a good state for processing. In return the Cocoa Board would pay the farmers a fair price and support them in other ways where possible. The process of interaction between the two parties was facilitated by a substantial network of agents and extension-like workers. Somewhere along the line this social and commercial contract was broken and now we have to fix it, and fast”

The Cocoa Industry Board itself ran with no subsidy from the Jamaican Government over its lifetime. However it did not adequately re-invest any surpluses, such as it may have had, in the upkeep and modernisation of its plant and operations. Operational and processing inefficiencies set in and the cocoa farmer received less and less percentage of the end price every year which served as a strong disincentive to keep producing in subsequent years. Fewer farmers producing less cocoa and getting less pay for their crop created a downward spiral in the cocoa sector.

Vernon explains - “When one looks at the equipment in Richmond it’s like doing an archaeological dig. The size of the equipment there speaks to the once substantial scale on which cocoa was then grown and supplied (and no longer is). The equipment’s age speaks to it being from the 1950-60’s and highlights the absence of refurbishment over the years. Norman Washington Manley, then Chief Minister, was the leading figure who opened the Fermentary in St Mary in 1959”.
“In fact the visual trail symbolizes how agriculture in these quarters was not treated as a commercial business requiring the application of business principles and general upkeep to be sustainable over the longer period.” Vernon remarks.
Can investors, local or overseas, be attracted to offer an alternative model of operating in the cocoa industry by acquiring the Cocoa Board’s operations? Vernon doesn’t seem persuaded.
“The cocoa fermenting plant and drying equipment is very old and not of much commercial value” he explains. “An investor might as well start from scratch with buying new, perhaps smaller scale equipment. But even then they still need to have sufficient regular supply of cocoa beans and that would mean acquiring their own cocoa lands to grow it. The Trinidad experience shows that about 600-1,000 acres would be the scale required to export directly, privately. Are cocoa fields available for acquisition in such contiguous acreage? Would investors be willing to start planting new cocoa seedlings from scratch and wait the 3-4 years for adequate yields?”

“Alternatively such investors could try and develop a working relationship with current numerous small cocoa growers to supply them. Would they, as a private investor seeking to maximise their returns, give a small cocoa farmer a better price for cocoa beans supplied than a properly functioning Cocoa Board?” he queries. “And it’s not like processing coffee where the beans are just dried in the sun, cocoa beans require properly managed fermentation and then two-staged drying – it’s a process requiring careful skill, know-how and quality control management. Is it in anyone’s interest to have lots of smaller fermenting and drying operations on numerous farms scattered across the country? How would you quality control such a set-up to protect Jamaica’s status as a producer of fine flavoured quality cocoa attracting premium prices? Who would pay of it and who would implement it?

The whole benefit of Jamaica being recognised in the international cocoa market as a sole producer of premium fine cocoa would be endangered. Even the remotest chance of losing or contaminating this status would be disastrous to Jamaica’s cocoa industry. Our reputation for fine flavoured cocoa is paramount.

Bulk cocoa, as produced by Ghana, Brazil and Ivory Coast, is sold for a third to ½ the price of fine cocoa from the Caribbean. That bulk cocoa is of no use to us – we cannot compete with such volume producers on price. Like our Blue Mountain Coffee we need to compete in the world market on quality”.
“No what we should aspire for, certainly in the short term, is a modernised and efficiently functioning Cocoa Board working harmoniously, through an effective extension cocoa agent network, with the thousands of existing small cocoa farmers, giving them a good price for their premium quality product with Jamaica safeguarding its position as producer of one of the finest tasting cocoa in the world”.

Vernon adds “With the continued good growth in the cocoa market and excellent prices for fine cocoa, it is conceivable for a few large scale cocoa farmers to work alongside or within such a cocoa industry framework in Jamaica but wholesale rapid privatisation of the industry is not a feasible option in the short term”.

“One thing is for sure. The thousands of acres planted out in cocoa trees, on small lot holdings, over the past 20 to 50 years across Jamaica are still an important productive resource that cannot be replaced overnight. These trees are still bearing cocoa and many grow wild with the crop going to waste – eaten by rats or birds. We need to act NOW with what we have to implement a sector turnaround and the EU funded Cocoa Board project provides funds to effect the immediate interventions necessary to address these issues”.

The European funding will be used to rehabilitate cocoa fields in close proximity to the Richmond fermentary, train and educate small cocoa farmers, capacity-build the Cocoa Board, and make significant improvements to the cocoa yields with resultant higher prices to the small cocoa farmer. Under new leadership the Cocoa Industry Board is already being successfully transformed, even reformed, to help revitalise the cocoa sector for the benefit of the small farmer in the near term whilst longer term plans are being formulated for the industry.

In subsequent articles we will explore in greater detail the activities funded by this EU funded project - now in its fourth month - that will catalyse this long overdue transformation process in the Jamaican Cocoa Sector.

Vernon Barrett (April 2010 )