Cacao Economics

Hello and good day!

Here in Washington, we are starting to see the first signs of Spring.

Spring is such a marvelous time.

The trees come out of hibernation.

Dry brown branches begin to bud with bright green shoots.

In the mornings, we see hordes of small birds pecking for worms and insects in our front lawn.

Once the time changes in March, I hope to see the morning possum again.

I can’t see him or her now (I don’t know how to determine the gender of possums from a distance) because it is still too dark in the morning.

But when the time changes, throughout Spring and Summer, I see that heavy set, low to the ground, animal waddling down the fence and disappearing into the street just about every morning.

I can’t say exactly why I like seeing the possum so much.

Maybe because I am the only one who gets to see it. It is mine and mine alone.

It has chosen my fence and my yard as a part of its daily migration, and I am appreciative.

I also have a deep-seated respect for routines and rituals, and I admire the consistency of this particular possum.

Lastly, I like observing the ways in which human behavior coincides with nature at large.

So much of nature is driven by routines and cycles and this is true of human life as well.

If that possum isn’t around, it will feel as if something has gone off the rails.

But if the possum shows its face, its long, cone shape face, then I’ll feel that things are carrying on as they should.

The earth rotates while orbiting the sun.

Day turns to night and night turns back into day.

The seasons come and go caused by the earth’s tilt and its relation to the sun.

The rains come and soak the soil.

The sun shines hotter and with enough water and sun, plants have what they need to be the base of the world’s food chains.

Herbivores eat the plants.

Carnivores eat the herbivores.

Omnivores eat it all, including chocolate.

When the rains don’t come as they should, chocolate consumption will have to be curtailed, at least for some people, not for Fortunato Chocolate customers though.

The West African countries of Ghana and Ivory Coast have suffered through two years of bad weather conditions and their crops have come up very short.

Given that these two small countries produce 70% of the world’s cacao supply, this predicament has sent the world’s biggest chocolate companies searching for non-traditional sources.

And they are buying in non-traditional ways.

There has been a lot of news reporting about the chocolate market and the coming price increases.

Here is what will be overlooked though.

The people who will suffer most from this are cacao farmers in West Africa.

And the prime cause of their suffering is their governments’ antiquated distribution system.

Out where we buy, cacao farmers are having a field day.

They are making more money than they’ve made in decades and that is a very good thing.

When bumper crops begin again in Africa, and the world market is flush with surpluses, prices will fall heavily, and our cacao farm partners will earn less again.

We’ll still be there when that happens, paying our healthy premiums as always.

I say that the distribution system is bad in West Affrica because the government doesn’t allow for free bargaining between buyers and sellers.

The governments dictate the year’s cacao selling price to cacao farmers and the farmers have to accept it.

The government then sells a limited number of licenses to companies who can buy cacao in their countries.

All of those licenses are sold to huge companies.

It is a situation perfectly suited to graft and exploitation.

A poverty-stricken cacao farmer has a certain number of cacao trees and with those trees, they earn their living.

The price they get for their cacao determines the level of their poverty.

Out where we are operating, it is a gosh darn free for all these days.

We’re talking all-out bidding wars.

Thankfully, our business model of cutting out middlemen and excellent supply chain management is allowing us to win the bidding wars and secure the needed supply of cacao to continue making chocolate.

The whole scene is exactly as the Economics 101 textbook draws it up.

Supply shortages lead to price increases in a competitive market as actors bid up the price in an attempt to secure the newly scarce resources.

But this can only happen in a competitive market.

In West Africa there is no competitive market.

If there was, there would be bidding wars happening there too and the resulting price increases would help to alleviate the economic damage done by the shortages.

And when times were good, small companies like ours could still come in and pay premiums and help with post-harvest processing.

All of this is impossible under the current paradigm in those countries, and it is such a shame.

The chosen economic program benefits huge companies who earn billions every year and the government officials who are in cahoots with them.

At the grass roots level, it leads to poverty, child slavery, and environmental destruction.

And all for what?

To produce a cheap piece of candy that doesn’t even taste that good.

This is why I am a free-market economics person.

Some things can’t be overcome by a system of economics.

Geography can’t be easily solved.

If you live in a remote and rugged part of the world, poverty is common because public infrastructure is normally slow in coming to those parts.

Weather is out of our control too.

If the rains are wrong and your crops come up short, the economic system can’t solve that either.

But free economies do create the necessary preconditions so that good companies who want to help can try to help.

Good guys can win bidding wars against bad guys and farmers have the freedom to choose the best option for themselves.

Totalitarian economies dictate the terms to citizens, and you are stuck with the consequences.

It is a very bad system and millions of folks are suffering as a result right now.

By the way, I am a bleeding-heart liberal on a lot of issues.

Not on economics though.

The best way to fund social programs is to scrape off the top of a highly productive economy.

You don’t try to force prices on businesspeople.

Individuals are perfectly capable of negotiating their own prices.

Sorry if I got off on a bit of a rant.

I’ve been really sick, and I think that I am just starting to get my energy back now.

The old passion seems to be flowing again.

And I’ve read a few articles about what the shortages are doing to farmers in Africa, and it breaks my heart.

Especially because there are known solutions to the problems they are facing.

Freedom is the best option.

I strongly believe in that.

It isn’t a panacea, but it is the best choice there is.

Thank you so much for time today.

I hope that you have a truly blessed day!

Adam

Click here for wonderful chocolate made with pure Nacional cacao.