The absence of the West African cacao supply in the world market has forced international buyers and traders to source supplies elsewhere in the world. And that includes the Philippines.

âWe, therefore, have international traders here in the Philippines now that are affecting local prices since their prices are based on global cacao prices,â said Philo Chua, founder of Theo & Philo Artisan Chocolates.

Theo and Philo used to pay higher than the prevailing world commodity prices for their cacao needs. Now, they are catching up.

âWe are paying about 50 percent to 100 percent higher right now compared to what we were paying before,â Chua said. âUnfortunately, with higher prices for the main raw material that we use, it leaves us no choice but to increase our prices also.â

Agriculture Undersecretary Cheryl Marie Natividad-Caballero confirmed that European chocolate manufacturers are looking for alternative cacao suppliers including the Philippines.

âIf they do not have the raw materials, then how can you talk about Belgian chocolate?â Natividad-Caballero said.

Even the large chocolate players in the country who have been relying solely on imported cacao have all of a sudden become interested in local cacao since the price gap between imported and locally produced raw materials has shrunk to the point that the two are nearly matched.

âEven those that found the Philippines an expensive environment are now like, âwait a minute, itâs not as expensive as I thought,â because now the gaps between the international prices and local prices are shrinking,â Kelly Go, co-founder and managing director of Auro Chocolate, said.

Exporters like Auro Chocolate are receiving more orders from their clients abroad. The artisan chocolatier ships its products, including cacao beans, to Europe, some Asian countries and the United States. But for its cacao beans, it is prioritizing Europe at the moment.

âWe have gotten more inquiries than ever before,â Go said. âGlobally, everybody is scrambling. Absolutely scrambling. Everyone is canvassing back to the drawing board.â

Cacao challenge

If you ask Go how she would describe the countryâs current cacao situation, she would say it is challenging. In fact, it is the âmost challengingâ period.

âIt is even more challenging than when we had first started,â she said.

The challenge comes in navigating the extreme volatility in cacao prices today. On one day itâs $10 per kilogram. On another, it drops to $7. And then it recovers to $8.

Go and her colleagues are meeting more frequently than ever. What used to be a once in a season meeting to set buying prices for cacao became monthly and then weekly. On some days, it is even daily.

Auro also purchases cacao beans at a premium, about 10 percent to 15 percent higher than prevailing world prices. But that has been quite a struggle for the firm to keep it at present rates. The margin became absolute figures instead of a percentage.

âOur ability to pay farmers that premium is also dependent on our ability to sell at that premium,â she said.

âWe are striving to give the best price quality ratio to our partners. And in this environment, I would say that that has been the most difficult,â she added.

Auro has increased its prices by at least 15 percent across its product line earlier this year. It is studying another round of increase this quarter as their cacao costs have at least tripled in the past six months.

âEven if we are a social enterprise, we need to protect our bottom line or else we cannot do what we do,â Go said.

Cacao quality

Domestic cacao production has been growing consistently in the past 13 years. In fact, output has more than doubled last year to 10,759 MT from 4,856.48 MT in 2011, thanks to expansion in area harvested.

During the same period, total harvest area for cacao has reached nearly 33,000 hectares, more than triple than the 9,581 hectares recorded back in 2011.

What is worrisome, however, is that the average cacao yield today plunged to 320 kilograms per hectare from 500 kilograms per hectare 13 years ago.

The governmentâs cacao industry roadmap attributed the low cacao productivity to âhigh mortalityâ of planting materials and the âlack of knowledge of cacao growers.â

âGrowth has been relatively slow despite the many programs of the government to distribute and encourage cacao farming in the past years,â Chua said.

Quality issues persist too, says Josephine Ramos, a cacao farmer for over thirty years. Despite farmers having better knowledge of how the world cacao market works, particularly pricing, there is still work to be done in making them understand the importance of producing quality beans.

Industry sources note that quality issues in cacao production arise from various factors. One, farmers do not like fermenting their beans due to the added costs such as labor.

Second, the absence of sorting of cacao beans, which is tied to grading and pricing. Most farmers sell their cacao âall-inâ resulting in substandard qualities.

High quality beans command better prices, Ramos says. âIf you want a delicious chocolate, then you need a high quality bean,â she adds.

Since the global cacao crisis began, local cacao prices have gone up to as much as P350 per kilogram, nearly triple the P120 going rate last year, Ramos said.

Auro is now buying fermented beans as much as P390 per kilogram from P230 per kilogram last year. It buys wet cacao beans at P100 per kilogram versus a year agoâs P45 going rate.

The last time that this price level was seen was in the 1970s, during another global crisis but that time involved the decimation of cacao farms in Brazil because of pests and diseases, Ramos added.

âThe price of cacao had to go up eventually, right? At the price it was before, the whole discussion was that it was so hard for farmers to make a living income,â Go said.

Industry players are worried that some farmers may continue to disregard the quality of their beans as long as they are able to take advantage of the soaring prices to earn a profit.

âThe only fear that we have in selecting good quality cacao is that with high commodity cacao prices, the farmers may no longer concentrate on quality as commodity cacao and fine flavor cocoa would have close to or the same price point,â Chua said.

âWhat I tell my fellow farmers is to at least enjoy the prices today but it should motivate them to produce better quality beans. They can take advantage of the prices today if they produce quality beans. The prevailing prices today are not forever,â Ramos said.

Cacao funding

Natividad-Caballero said the government would take advantage of the rising commodity prices by encouraging local growers to not just produce more but better quality cacao beans.

One of the critical government programs aimed at boosting local cacao production is intercropping funded by the long-awaited coconut levy fund.

Under the fund, some P156 million has been allocated for the intercropping of cacao with coconut in selected areas in the country.

On top of this, the DA high value crops program is spending P67.2 million for the cacao industry.

Some of the imperative investments from the public sector involve the availability of quality planting materials, crop nutrient management, access to credit and construction of shared facilities, Natividad-Caballero said.

âYou just invest a little from the public and then the private sector can co-invest. Because we both see it as an opportunity,â the DA Undersecretary added.

Ramos, the cacao farmer, emphasized that the good thing about the Philippines is that its cacao farmers are not just reliant on cacao for their income. Farmers intercrop. They earn too from coconut, banana, lanzones and even durian.

Filipinosâ appetite for cacao has also changed in recent years, far more sophisticated than neighboring countries like Vietnam and Malaysia, Ramos adds.

âConsumers are now aware of the health benefits of cacao, the sweetener used in the products, its impacts to the environment and so on,â she said.

Private chocolatiers have been partnering with farming communities for their cacao needs and pay the farmers a premium. This way, Theo & Philoâs Chua said, they eliminate the middlemen in the value chain and ensure that the farmers get the full value of the prices.

One of the other interventions they make is the provision of quality cacao seedlings and other nursery materials to ensure that the precious DNA of their cacao supply is preserved and its production expands.

But the current global cacao crisis has forced these local artisanal chocolatiers to go back to the drawing board and come up with more creative ways to support their farming communities.

Cocoa future

Government officials and industry players all agree on one thing: a new chapter for Philippine cacao is set to unfold after this crisis. The consumption of cocoa-based products â most especially chocolates â would just continue to grow in the coming years.

âWhat Iâve learned from years working in the chocolate business is that chocolate/cacao is a mainstay and will never go away. It is well loved globally and with the healthy effects of cacao being more well known, it only drives further the demand for cacao/chocolates,â Chua said.

âBecause we are in the Philippines and in Asia in general, I found it so exciting because thereâs still so much untapped potential in terms of the market,â Go said.

The agriculture department still sets its sight on raising farmersâ gross income to at least P130,000 per hectare a year and boost the countryâs exports sales to at least $75 million, all the while generating an additional 17,000 jobs in the industry.

Ramos said it is a matter of communicating and making both producers and consumers understand what is happening to the cacao industry today. If you have quality chocolate, you have to pay the price, she added.

âThere are a lot of stories in chocolate. Every wrapped, packaged chocolate has a story on its own. It is a lot more than the packaging â it is seeing what is really in the product,â she said.

Go puts it aptly: chocolate has become an everyday luxury. âI believe we eat chocolate because it is pleasurable,â she said.

As for Carolyn, the home baker, the next chapter is already here. It began on a Friday.

âDear valued clients, please note that there will be a slight adjustment in the price of our goods starting August 1, 2024,â an instagram post by Salted Caramel Manila last July 5 read.

âThis is due to the increasing prices of cocoa and other raw materials. We are committed to offering you the quality and yummy treats that you expect and deserve,â it added.

Source: https://www.philstar.com/business/2024/07/09/2368682/chocoholics-bite-bitter-truth-cocoa-prices-soar

By Jasper Emmanuel Arcalas - The Philippine Star

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