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 Stage 2: Selling Cacao
Cacao’s Market Stability
The market price of cacao depends not only upon the abundance of the crop or the quality of the harvest—it also depends upon economic conditions around the world.
Political situations, recessions, inflation, and many other circumstances can affect how much farmers will be paid for their crops.
Cacao goes through “boom” cycles.
Like other crops sold on the futures market, the global price for cacao goes through high and low cycles. A rise in consumer demand or a decrease in cacao production results in a “boom,” meaning that prices rise.
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 Example: In the mid-1980s, prices spiked because cacao supplies dwindled. This was partly due to poor weather conditions (such as drought and fires) that reduced the supply of cacao. Also, market speculation about cacao’s future artificially raised its value.
Seeing this price hike, farmers planted more cacao trees hoping to increase profits. All over the world, farmers in tropical countries began taking advantage of the situation by planting cacao trees—even in countries like Malaysia that had never grown cacao.
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Cacao goes through “bust” cycles.
When farmers produce more cacao than people will purchase, the value of cacao declines. This is called a bust. A “bust” cycle can wreak havoc on the economy of a country dependent on cacao.
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 Example: In response to the high prices of the late 1980s, the government of Ghana began to tax cacao exports and find other ways to spread cacao profits throughout Ghana’s economy.
Unfortunately, by the mid-1990s, so many countries had begun farming cacao that the surplus of seeds caused worldwide prices to fall dramatically. Ghana’s economy was badly damaged due to its reliance upon cacao.
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Companions in Commodity Trading
Cacao and sugar mingle in more than just a hot cup of cocoa or your favorite chocolate bar. They merge on the futures market, too. In fact, the market rates for these crops are usually quoted together as part of the Coffee, Sugar, and Cocoa Exchange, Inc.
Origins:
Sugar comes from both sugar cane and sugar beets. Sugar cane and cacao both originated in tropical regions of the world. Early on, both plants were farmed on plantations using slave labor, and both were part of the original “Triangle Trade” between Europe, the West Indies, and Africa.
Outlook:
Weather, disease, and political issues all affect the supply of both cacao and sugar. However, sugar has a distinct advantage over cacao: it can be grown in a much wider geographical range. That means that many different countries produce sugar—and these countries often purchase and consume most of their own crops. Cacao, on the other hand, is primarily an export crop for the countries that grow it.
Plus, regulatory agencies and special protective agreements around the world safeguard and control the amount of sugar grown to keep the prices more stable. Many people wonder whether cacao farmers could benefit from similar policies and standards.
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Continue to Stage 3: Manufacturing Chocolate
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