A spate of corporate mergers between major cocoa and chocolate players could reduce farmers’ choices and bargaining power, lowering incomes to levels that could threaten the sector’s future, growers and campaigners have warned.
“We could face a kind of monopolistic situation that would have an impact on the farm gate price,” Edmond Konan, executive secretary of the World Cocoa Producer Association (WCPA), said on the sidelines of an International Cocoa Organisation meeting.
The WCPA, which represents farmers from nine cocoa producing nations, was recently created to lobby for the interests of growers and represent them in dialogue with the industry.
Mergers, either completed or under way, in recent years include the fusion of Cadbury and Mondelez, Archer Daniels Midland’s sale of its chocolate arm to Cargill and its cocoa business to Olam International.
Swiss agricultural commodities trader Ecom Agroindustrial Corp bought Britain’s Armajaro Holdings’ coffee and cocoa trading arm, and Barry Callebaut AG bought Petra Food’s cocoa ingredients business.
Konan said companies expanding their business should ensure they benefit the entire cocoa supply chain, particularly farmers.
“They need to bear this in mind, because if farmers are not making money, they will do something else. They will cut down their cocoa trees and plant other commodities,” he told Reuters.
Benchmark cocoa futures prices are volatile with the London market up 50 percent from 2011 lows but down 22 per cent from the 33-year high in 2010.
PROTECTING
FARMERS’ INTERESTS
Olam will increase its cocoa processing capacity to 16 per cent of world supply with its acquisition of ADM’s cocoa business.
Growing market concentration will decrease farmers’ already weak bargaining power, warned Antonie Fountain, managing director of the Voice Network, which campaigns to improve the lives of farmers.
“The fact that you have fewer global players dictating the game of supply and demand that the commodities markets depend on means you can be sure that farmers’ interests are going to be less served by such a price-setting mechanism,” he said.
Fountain urged governments to scrutinise mergers under competition law and potentially take action to ensure companies do not develop dominant positions at home that could hurt farmers in other countries.
“In the corporate field, it makes sense to try to expand your activities and absorb your competitors,” ICCO executive director, Jean-Marc Anga told
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