Valentine's Day brings focus on cocoa prices

Love is in the air as Valentine's Day sees millions renew their affairs with chocolate, with prices of cocoa having seesawed to 30-year highs

PUBLISHED : Thursday, 13 February, 2014, 1:24am
UPDATED : Thursday, 13 February, 2014, 4:16am

On this Valentine's Eve, as the thoughts of millions of lovers across the world will turn to one comfort - theobroma cacao, or to you and me, chocolate - my own thoughts turn to food security - a high-priority issue for our trade officials at the Asia-Pacific Economic Co-operation forum.

Theobroma cacao - like love itself - is a fragile thing, picky where it will grow, and vulnerable to all manner of viruses and plagues.

As supply has seesawed in recent years, so demand has soared, particularly in China. As a result, world prices are close to the highest levels for more than 30 years.

Since the Aztec leader Montezuma in 1519 gave the Spanish conquistador Hernan Cortes a solid gold cup full of cacahuatl - cocoa to us - the world's love affair with the "food of the gods" has grown steadily.

Today, cocoa is grown by about five million farmers around the world, employing up to 50 million people in the chocolate industry, and playing a very large part in providing comfort and happiness to many in times of stress.

Despite its popularity, chocolate took a time to catch on. The cacahuatl that Cortes drank was bitter, but its reputation as a stimulant was strong. Among the Aztecs, it was regarded as far too intoxicating - and expensive - to give to women or children.

Cortes was intrigued enough to take it home to Europe, where it was introduced in 1544, but it was not for a further 300 years that the chocolate that we know and love today became a reality.

As supply has seesawed … prices are close to the highest levels for more than 30 years

We have to thank the Dutch chemist Coenraad van Houten in 1828 for finding a way to purge the bitterness from the cacao beans, and to separate cocoa solids from cocoa butter. From the solids came cocoa powder, and chocolate was born (milk chocolate took a further 50 years).

The love affair with chocolate is largely a European and US thing. In the United States alone, lovers spend US$700 million on the "food of the gods" at Valentines - part of a worldwide market that is worth about US$90 billion a year.

While the US is the biggest single market, the world's biggest consumers on a per capita basis are all in Europe, led by the Swiss, Austrians, Irish, Germans and Norwegians. The Swiss - clearly an extremely amorous and romantic lot - consume an average of about 10kg per person a year.

By contrast, average consumption of chocolate in most of the developing world is negligible. In mainland China, chocolate consumption is less than 500 grams per person per year, with a total market in 2010 of less than US$2 billion. But this is more than double consumption levels just a decade ago, and is 40 per cent up in the past year alone.

In Hong Kong, we make a stronger romantic claim, with our seven million population spending US$166 million on chocolate last year - almost 10 per cent of all the chocolate consumed on the mainland.

But like love itself, chocolate comes from fickle and sensitive roots. Theobroma cacao will only grow in the tropics, close to the equator. It needs rich soils, lots of moisture, and seems happiest in the shade under a high jungle canopy.

More than 40 per cent of the world's cocoa today comes from just one country - the Ivory Coast. Add Nigeria, Ghana, Indonesia and four other countries in the tropics, and you account for 90 per cent of world production.

Not only is the plant sensitive about where it will grow, it is also vulnerable to some very horrid sounding illnesses: witches broom, frosty pod rot, swollen root virus, cocoa pod borers, water mould, and - in Asia - vascular-streak dieback.

There are also terrible worries about global warming: as temperatures rise, so cacao bushes could in theory be grown at higher altitudes. The only problem is that countries like the Ivory Coast are flat and low lying; there is no "up hill" to move them to.

In short, therefore, our love affair with chocolate is under threat. Just as mainland China's 1.3 billion people come into enough money to become consumers, and begin to develop the West's sweet tooth and learn its romantic customs, so the world's crop looks like it is under threat.

Prices have whipped and sawed - from a 32-year peak of US$3,520 per tonne in 2010 to US$2,200 in 2011, and back close to record highs again today.

Add to this volatility in cocoa prices a similar volatility in sugar prices - sugar and cocoa being the most important ingredients in chocolate and many naughty Valentine desserts - and the scene looks set for an expensive Valentine's Day.

Worldwide, there are many good and worthy arguments that can be made for improving food security. Here is a romantic one.

David Dodwell is the executive director of the Hong Kong-Apec Trade Policy Group