The cacao bean, once thought a divine food by the Aztecs that imparted wisdom, is now considered by its farmers the curse of “brown gold.” The curse itself is easy to understand: manufacturers like Hershey’s and Nestlé must sell cheap chocolate to make a profit, and where else to cut costs but at the very bottom of this food chain? There, we find the cacao farmers of the Ivory Coast. These impoverished Ivorian farmers supply 40% of the world’s total supply of cacao beans alone. Despite playing such a dominant role in the global chocolate industry, the Ivory Coast benefits little from its position and does not have the leverage required to raise the prices of cacao exports to support its workers. Over half of the one million Ivorian cacao farmers live below the international poverty line set by the World Bank, earning roughly $1.2 a day.
Upon first glance, the chocolate industry seems to have amplified the Ivorian economy when analyzing growth alone — after all, a country with a GDP growth exceeding 7% for the seventh consecutive year does not seem impoverished. However, with their dependence on cacao as an export and their vulnerability to price fluctuations, the Ivory Coast is extremely volatile. A 1% drop in revenue from cacao causes a corresponding 0.63% drop in government spending. Oversupplies and shortages of cacao are not uncommon, with changing weather conditions and market forecasts lending to the unpredictability of cacao yields and pricing (see Figure 1 for fluctuations of cacao prices per tonne over the past 200 years). Following a global glut of cacao in 2017 after cacao traders expected a surge in demand that never happened, export prices fell by 36% overnight. The government netted a loss of $1.1 billion in exports and had to cut its annual budget by 10%. This price drop led farmers to smuggle cacao into neighboring Ghana where selling cacao earned farmers an additional $500 per tonne compared to their native Ivory Coast. Smuggling not only created an oversupply of cacao in Ghana but also deterred cacao buyers from making purchases from the Ivory Coast, in fear that their products would be moved across the border, further hurting their economy. The Ivory Coast’s dependence on cacao leaves its economy highly susceptible to price drops and, consequently, the disorder and chaos associated with farmers desperately trying to earn enough to survive.
Figure 1: Cacao Price Fluctuations
Aside from concerns over market fluctuations, the Ivory Coast’s economy will face the ramifications of deforestation, epidemics, and climate change in the coming years. Considering the need for farmers to expand their land to match cultivation expectations and earn a living income, the Ivory Coast’s forest cover dropped from 12 million hectares in 1960 to less than 3 million hectares as of 2019. While deforestation correlated with the quadrupling of cacao production since 1980, the drastic decrease in potential farmland means that expansion is no longer sustainable. The cacao orchards that farmers are maintaining are plagued by epidemics, forcing farmers to replace their current stock of cacao trees. Therefore, they are given no choice but to wait for the new trees to mature before they can make a profit. The current deforestation and cacao tree epidemics do not even account for the future ramifications of climate change. Global warming has already begun perverting the environment in Western Africa. As global warming parches land and reduces orchards’ fertility, the West African environment in which cacao thrives will no longer be able to support the staple of the Ivorian export economy. Cacao farmers must either move their orchards further from the eastern edges of the country to the west or risk losing their orchards altogether.
Due to their high poverty rates, susceptibility to market fluctuations, and vulnerability to climate change, the Ivory Coast must stop relying so heavily on the cacao industry. If the Ivory Coast does not distance themselves from cacao, it will at best lose opportunities to further develop and diversify their economy; at worst, it will see its GDP rate drop and watch as farmers lose their only source of income. The Ivorians may have a sweet tooth for farming cacao, but if they keep indulging in the same habits, they will set themselves up for economic failure.
Katherine is a sophomore in the Global Management Program and intends to minor in History. Her interests in international business and markets inspired her to join BRB’s economics column to explore more about economics around the world. Beyond international relations, she also enjoys understanding how the political landscape affects markets and is excited to pursue these passions in BRB. As a San Diego native, she loves nice, sunny days and can be caught reading in the park; otherwise, you’ll find her binging some movies or shows.