Cacao production and exports on the rise

With demand for cacao on the rise and a projected global deficit of 1m tonnes by 2020, according to the International Cacao Organisation (ICCO), cacao production in Colombia is set to receive special attention in the next few years. While the country currently accounts for only 1% of global cacao production, the potential for much higher growth is tremendous. To capitalise on it, the government and the private sector are joining forces and rolling out long-term strategies to increase production and enhance Colombia’s competitiveness at the international level.

Production

Cacao production has registered stable growth in the past few years. In 2013 production increased 12% reaching 47,000 tonnes, up from 42,000 tonnes a year previously, according to the National Federation of Cacao Producers (Federación Nacional de Cacaoteros, Fedecacao). Going forward, Fedecacao forecasts production will reach 50,000 tonnes in 2014.

Growth is in large part due to a rise in productivity as a result of recent efforts to renew old plantations across the country with younger, more disease-resistant trees. The cacao tree starts producing in the second or third year and reaches full productivity in the fourth or fifth year. In 2013 many of the new trees came into production, while others are now reaching full productivity. The renewal campaign is part of Fedecacao’s efforts to improve productivity. Fedecacao assists more than 29,000 of the estimated 32,000 cacao producers in Colombia.

Cacao farmers contribute 3% of the value of each kilo of cacao sold to the National Cacao Fund, administered by Fedecacao. The funds are used to advance research and assist producers with commercialisation efforts and technology transfers. A recent important effort by the organisation was the introduction of a technological package to improve productivity and address phytosanitary issues, such as witches’ broom, a condition common in cacao plantations in Latin America, due to the humidity and tropical temperatures that facilitate the spread of the disease.

Exports

Production is mainly for domestic consumption, with the country’s two largest processing firms, Nutresa (formerly known as the National Chocolate Company) and CasaLuker, absorbing between 80% and 90% of output. Domestic consumption of cacao, a staple of the Colombian diet, is 0.8 kg per capita, and according to Eduard Baquero López, executive president of Fedecacao, there is potential to increase domestic consumption to 1 kg per capita.

Colombia began exporting excess production in 2011 and since then cacao exports have registered stable growth. In 2013 exports of the good reached 7600 tonnes. The same year, 250 tonnes of cacao were exported through Fedecacao directly, mainly to Europe. By May 2014 the organisation was already nearing 200 tonnes. “We are confident we can reach 1000 tonnes in 2014,” Baquero told OBG.

Spain is the largest export market, but according to Fedecacao, interest in Colombian cacao is rising in several other markets as well. Proexport, the country’s export promotion agency, has identified export opportunities for the bean in 14 markets around the world, including Germany, Argentina, Belgium, the UK and Switzerland. “Most of our commercialisation efforts are directed at Holland, Belgium and the UK for the extent of their consumption and the size of their processing industries, but Switzerland, Germany, Russia, the US and Canada have all shown interest in our cacao,” Baquero told OBG.

Pricing

Cacao producers have been aided by the rising price of the good, which has increased consistently for the past three years and reached $3071 per tonne in May 2014 on the New York Mercantile Exchange, largely due to the prospect of a production deficit in the 2014/15 season.

Prices are expected to continue rising with long-term forecasts of demand surpassing supply. The ICCO estimates demand will soar to 1m tonnes by 2020 as requirements in Asian markets, in particular China, grows. Given the high quality of Colombian cacao, Fedecacao has been working to increase the premiums paid on Colombian fine cacao.

Growth Prospects

To capitalise on the potential for growth that cacao production presents, the Colombian government is joining efforts with the private sector to boost the country’s competitiveness internationally through incentives to production, both in renovation campaigns and with the grafting of new trees. The goal is to bring into production an additional 700m ha available for cacao cultivation, while providing producers with adequate financing instruments and incentives to invest in their plots.

According to a press statement released by Fedecacao, the government is also contemplating changes to the Rural Capitalisation Incentive, an incentive in the form of cash grants for new investment projects aimed at improving competitiveness, reducing risk and guaranteeing sustainable agricultural production. The changes are designed to attract more investment for new projects with the potential to contribute to the expansion of cacao production.

Promotion of cacao production has also been part of the government’s coca eradication programme for some years. Both trees require similar growing conditions. Therefore, a shift to cacao cultivation is being promoted as an option for farmers looking to leave the cultivation of illicit crops. To this end, the government has plans to renovate 80,000 ha of old plantations. This campaign could take place as early as 2015, if the required funds are made available.

Expansion

While Colombia accounts for only around 1% of global cacao production – whereas regional neighbours Ecuador and Brazil make up around 4% and 5%, respectively – Colombian cacao is highly regarded in international markets. In 2013 Colombia’s Fino Aroma cacao won an International Cacao Award at the Salon du Chocolat in Paris for the second consecutive year. This type of cacao accounts for only 5% of all global production, and 70% of it is produced in Colombia, Ecuador, Peru and Venezuela.

The potential for growth in Colombia is significant. Cacao production remains fragmented with around 32,000 producers spread over more than 150,000 ha. According to Fedecacao, there is scope to establish an additional 700,000 ha of cacao plantations. The Ministry of Agriculture and Rural Development, along with Fedecacao have ambitious plans to reach 1m ha in the next decade to take advantage of favourable conditions in international markets.

Such an expansion would see Colombia surpass regional producers such as Brazil and Ecuador, as well as Ghana and Indonesia further afield, which are among the biggest producers in the world. Ivory Coast, the largest cacao producer, has an annual output of around 1.5m tonnes, according to the ICCO.

Productivity

There is also potential to increase productivity considerably. More than 40% of cacao producers still use traditional means of cultivating the crop, without the aid of any more modern technology or methodology, according to Fedecacao. “We have a technological package that can increase productivity in these areas by more than 70% without planting more trees,” Baquero told OBG.

For this reason, yields vary considerably. Some areas reach productivity levels as high as 3000 kg per ha, among the highest in the world; yields in West Africa, which accounts for two-thirds of the global supply, range between 350 kg and 600 kg per ha. However, low productivity in areas with old plantations and phytosanitary problems bring down Colombia’s average to 400 kg per ha. Recent free trade agreements (FTAs) are also likely to open new opportunities in exports, particularly via access to Asian markets where demand is rising faster. “We are optimistic that our quality and increasing productivity will make us more competitive and allow us to take advantage of the recent FTAs with the US, Canada, the EU, South Korea and the Transpacific Alliance,” Baquero told OBG.

Indeed, Colombia could benefit from increased trade within the regional Pacific Alliance specifically. “We expect the Pacific Alliance to boost commerce within member states and Asian countries, even though we still have to wait and see its real effect,” Luis Alberto Botero, president at Team Foods, told OBG.

Commercialisation

In an effort to improve visibility of Colombia’s cacao in international markets, CasaLuker and Marca País, the country’s recently redesigned brand manager, began a partnership in early 2013. The initiative aims to promote Colombia as a producer of high-quality cacao and raise its attractiveness for investment. As part of the partnership, in 2014 CasaLuker is taking the national brand to global events. As of early 2014 CasaLuker had made its debut in confectionary world trade show Europain in France, one of the most important industry fairs in the world, as well as other confectionery fairs such as Sial, in Montreal, Seoul Food in South Korea and the World Food Moscow in Russia. Since 2013 cacao producers have also been receiving a commercialisation subsidy. Initially COP500 ($0.25) per kilo of cacao, the subsidy was raised to COP800 ($0.40) in 2014.