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Cocoa plants grown abundantly in Ghana and other countries have provided mankind with one of the most exciting ingredients, creating the fabulous Chocolate industry turning out a multitude of products with universal appeal, irrespective of age, gender and faith. Leading players in the global arena include Mars Inc, Cadbury Schweppe, Nestle SA, Ferrero Sp, Hershey and Kraft Foods, with a combined market share of almost 75% in a global sale of $ 40 billion. There are a few niche companies also in the scene offering specialty chocolates with various attributes, though their share is less than 1%. Organic chocolate products, in great demand lately, are now available in the main stream market, the total production being around 15000 tons an year.
Cocoa production is concentrated in Africa and Asia and major producers include Ivory Coast (37% of world production), Ghana (21%), Indonesia (13%) accounting for more than 70% of about 35 million tons produced each year by about a dozen countries. Fair Trade cocoa, a distinctly separate category of cocoa production, is produced by several countries who have subscribed to the idea that ethical production can only be sustaining force for the industry to survive in the context of widespread use of child labor by cocoa plantations. It is sad that though many smaller producers have subscribed to the Fair Trade cocoa alliance, only two major producers, Ghana and Ivory Coast are members of this group. The Fair Trade label is now being used by some of the chocolate industry players to indicate that their products are derived from cocoa beans produced by fair means without circumventing any local and international regulations.
As cocoa is a rich source of antioxidants and other nutritional components, chocolate products containing significant levels of cocoa solids are being touted as a health promoting material and an entirely new branch of chocolate industry under the banner of "functional chocolates" is emerging to popularize their consumption in a big way. Unfortunately the health aspects are distorted to a large extent because chocolates by definition are rich in saturated fat and sugar. How can any one succumb to such claims knowing well that like other confectionery items chocolate also can cause same adverse effects like metabolic syndrome and dental decay. Typically a plain chocolate sample contains about 35 gm lipids and more than 60% carbohydrates including white sugar. But the four health promoting constituents in cocoa that include Theobromine, Caffeine, Phenylethylamine and Serotonin contribute to the favorable ratings received by chocolates. These phytochemicals are believed to be working at Central Nervous System and brain levels to promote a feeling of well being, boosting the mood and a feeling of elation. While a dark chocolate version will have about 70% cocoa component including cocoa butter, most of the commercial products have less than 7% cocoa solids.
It is amazing that almost one third of the consumers eating chocolates consider them as a well being product capable of stimulation and relaxation and it such feelings which are driving industry to expand the health chocolate portfolio on a furious pace. To day bitter chocolates with almost 85% cocoa solids are sold in the market under famous brand names. Specialty products like ActiCocoa containing high levels of antioxidants polyphenols, Probiotic Chocolates for gut health and Tooth-friendly chocolates containing isomaltose are marketed targeting the health conscious consumers. What is not condonable is tall claims like heart healthy and similar unsupported statements on the label by some of the responsible industry players and they are probably taking shelter under the ambiguous labeling provisions which do not call for declaring the concentration of antioxidants or polyphenols or the ORAC value which would have enabled the consumers to discriminate between performing and non-performing products.
The multi billion dollar chocolate industry is in for a shock if recent reports about cocoa hording in the UK are to be believed. It is believed that one of the notorious dealers in the UK, Anthony Ward had been buying cocoa beans from where ever they were available during the last few months and his present stock would be adequate to manufacture more than five billion standard chocolate bars! The consequence of his hording is a steep rice in the cocoa price in the London market reaching levels unheard of during the last 30 years. His firm Armajaro holds about 7% of annual cocoa production sufficient to dictate global price of cocoa beans. Though he does not make even a single bar of chocolate, his knowledge about cocoa makes him a formidable player in global trading and closely monitors production in west African countries through local set ups. Though chocolate makers in Europe are making noises about the market "cornering" activities of this UK hedge fund entrepreneur, how far the ultimate price of chocolates will rise eventually due to this phenomenon is uncertain.
While talking about price escalation in chocolate products, there are expectations that with fast approaching cocoa harvesting season beginning October, there might not be much of an impact from the activities of horders like Ward. Besides cocoa forms less than 10% of the production cost of most of the mass produced chocolates and the recent spurt in prices to the extent of 150% may not influence the market price of most of the end products from cocoa. Fears are expressed because a similar effort in 2002 by the same speculator did cause some damage to the chocolate industry from which it was able to recover quickly. Besides many of the major chocolate manufacturers did learn a lesson from the 2002 experience and probably would have built up sufficient stocks to last till the new harvest arrives in October.
Wheat market is getting more and more turbulent with Russia backtracking on its export commitments because of the severe drought ravaging the country. It is considered crucial that the global market is not allowed to "heat up" due to the temporary hiccup in grain production in one of the several countries that dominate wheat market in the world. Russia is 5th largest producer of wheat behind the EU, China, India and the US. According to market watchers what ever drop in global production has happened, that can be more than made up by the available stock in other countries like China, India, the US and Canada. India alone is sitting on a grain "mountain" estimated at 60 million tons (including rice), not knowing what to do with its surplus with severe constraint on domestic storage space for these grains. Any large export by India is considered fraught with the risk of price collapse in the world trade in wheat. It is unfortunate that there is no international cooperation amongst top producers to evolve a strategy to manage the present situation which is causing abnormal spurts in the price in the international market.
It may be recalled that a similar crisis occurred in 2008 when there was a severe drought in Australia leading to world wide shortages, fall in over all production and extensive embargoes on food export across Asia. This even led to "food riots" in Indonesia and Pakistan. At least one could understand the provocative but genuine cause for such disruption to global food supply at that time. The price of wheat, one of the major staples in the world shot up through the roof reaching $13 a bushel, a historical and unparalleled high in wheat price. But how is it possible that wheat prices are surging to day when there is a relatively small shortfall in production, that too in one country and global production recorded the third highest figure in history?. There is already dire forecasts that next years production would be less though such threat perceptions are generated by vested business interests, intent on creating opportunities to make unjustified profits on the fear of possible future shortage of wheat. It is feared that the consequences of such manipulations will ultimately affect the consumers in the rich as well as the poor countries. While higher wheat prices will reflect in higher prices for a wide range of wheat based consumer products like bread, biscuits, pizzas, rolls etc in industrialized countries, it will also affect poor and the hungry in the third world depending on imported wheat for survival. Who are going to be benefited by this unjustified distortion in wheat prices? Of course the rich farmers in the US, Canada, Australia and Europe who will laugh all the way to their banks with windfalls in wheat exports at high prices. Already farmers' organizations from the US are touring some of the Asian countries to bag orders for their wheat.
What is intriguing in the whole situation is why the Russians chose to announce the embargo on export now, even without waiting for the season to end? Are they in league with global wheat traders? After all Russia produced less than 50 million tons in 2007 while this year's projection was 90 million tons but they are still likely to harvest not less than 75 million tons. How can there be shortages there? Export commitments could have been met through bilateral consultations and accommodations with countries like India and China but it did not happen raising questions about the transparency of wheat trading system in the world. Is there no way to counteract the machinations of the wheat traders and ensure some stability in wheat prices? With massive subsidies that fatten the rich farmers in the US and Europe, it is very easy for these countries to raise wheat production but probably they may not do it because the scarcity will benefit their farmers in a big way. Considering that the US and India put together have more than 100 million tons of food grains in stock, the relatively small shortfall of production in Russia, should not have affected the global prices and a genuinely concerted effort by these countries with large stocks would have thwarted the efforts of speculators to ratchet up the prices under misplaced apprehensions. There is also the uncertainty regarding the attitude of China, top most producer of wheat in the world, to the present crisis, though they may not venture directly into global market for fear of escalation of domestic wheat prices. It is small consolation that the prices have not reached any where near the record highs in 2008 and there is still time for tackling this problem, given the dynamics of the situation.
In India's case there is already some apprehension that there would be a drop in production next year and this has clouded the thinking on the part of the government. As a knee-jerk reaction the high flying Food Minister has announced a slew of measures to augment the storage capacity, though no one is sure whether this would be translated into reality in the near future, knowing well the snail-like progress of government projects. Probably GOI could consider a strategic tie-up with Russia to loan to them some of the surplus grains for returning it next year when the production would pick up there, restoring normalcy in farming. By that time hopefully the new storage structures might be ready for use. Countries like China and the US have sufficient flexibility in their farming system to increase production within a short period. The present situation should not be allowed to be exploited by speculators for raising global prices that will affect the lives of millions of poor people who depend on purchase of wheat from international market by their countries. Led by Egypt the wheat importing countries in the third world constitute the largest net importers of wheat and they include Brazil, Indonesia, Mexico, Algeria, Nigeria, Iraq, Yemen, Bangladesh etc accounting for more than 90% of the 70 million tons traded in the world.
V.H.POTTY