First published 18-November-2004
The journey of cocoa from plantation to consumer reveals the extent to which African commodities underpin global trade. It also exposes the various nations that have strategic interests in the outcome of Ivory Coast vs France.
Cocoa is grown on large plantations. The crops are intensely farmed, in mono-culture formation and with large use of phosporus fertilizer. Most of the planting, cultivation and harvesting must be done by hand. The plantations use large numbers of labour, many of whom are migrants into IC from neighbouring Burkina Faso, Gabon, Ghana and Senegal. The conditions of work are atrocious. Workers are badly beaten, poorly paid, and cast out at first sign of illness.
Plantation owners borrow heavily from the international banks based in Abidjan. The loans are collateralised by a promise to deliver the physical crop in the future and to receive cash-flows on delivery. Plantation owners receive some money upfront to use in paying for seed, fertilizer, and other farming inputs. The cocoa farmer gets paid. Not all farms are big plantations. A big planter or a big wholesaler may have supply agreements with owners of small-holdings.
On the basis of these anticipated cashflows, the headquarters of these banks create commodity derivatives such as options, futures, forwards and swaps. Commodity derivatives are financial instruments. They are bought and sold many times over in the commodity exchanges such as CBOT (USA), LIFFE (UK), Marche (France). Commodity derivatives are very, very big business in the international financial markets. Some of the buyers are cocoa processing companies such as Cargill, ADM and Phillip Morris (also a big tobacco processor). Other big buyers are end-users such as the chocolate manufacturers, including Switzerland's Nestle/Rowntree, Lindt and Barry Callebrut; USA's Hershey and Mars; UK's Cadbury, among others.
Buyers usually intend to take delivery of the cocoa. However, nearly 98pc of international trade in commodity derivatives is purely speculative gambling. The speculators buy on expectation of increased prices and sell on expectation of lowered prices. Prices are volatile and change often because the quality and quantity of commodities produced in any one year cannot be predicted in advance. Excess rain during harvesting, excess exposure to sun during drying, crop pests and a thousand other risks may destroy the quality of any year's cocoa crop. Fortunes are made and lost due to the ensuring high price volatility. In order to limit their exposure to potential loss, many speculators and end-users buy insurance instruments or hedge their market positions. Not many international insurance companies and hedge fund investment companies even bother to refer to Ivory Coast in their marketing material. They still earn fortunes off the breaking back of the cocoa farmer.
One such farmer visited Cardbury's processing plants in UK. He learnt that hardly any chocolate sold in the huge UK market for "chocolate" products actually contains cocoa solids. The typical 200g bar contains an average of 0.5g of cocoa solids. There are plans underfoot to replace even that small amount with vegetable fat. The big markets for real cocoa solids are the Swiss-Benelux manufacturers of luxury chocolates. The other big market are the manufacturers of cosmetics such as cocoa butter.
The diminishing market for cocoa solids is a trend that reveals changes in the dymanics of strategic international interests across Africa. Ever since the slave trade, many of the continent's economies have been heavily dependent on exports of commodities. Most of the exports were to then-colonial, later-imperialistic, and now neo-colonial trading partners: countries such as UK/Britain, France, Belgium and USA.
Europe and USA dominate global consumption of goods and services. Their markets are now close to saturation point. Their employees are living from paycheck to paycheck. They have too much of the everyday things they want to buy. They have little spending power left after deductions for bills and credit repayments. As consumption falls, so has competitive advantage in production. USA and many Europe countries can no longer compete with the nascent Asian countries in manufacturing, information technology or agriculture. Even as their incomes fall, they are faced with rising expenditure relating to unemployment support, foreign trade deficits, and domestic social obligations.
The diminishing share of Africa's commodities in world trade is producing less slush funds both for the neo-colonials and for the local akotileta elite who rule the commodity-exporting countries on their behalf. With less slush funds, it is becoming more difficult for the neo-colonials to maintain the heavy military and diplomatic resources needed to provide "assistance" to the ruling akotileta. Scenting the opportunity, previously oppressed people are now rising to challenge years of misrule and corruption.
The disaffection in France is particularly acute. For decades, France sold the concept of "one motherland, many colors". The motherland of course was France. The many colors were not equal. Nonetheless, Africans from Mali to Gabon professed to being "french first before African". Equally, religious brainwashing caused Islam worshippers to think themselves "muslim first before African" and the Christian worshippers to think themselves "christian, full stop". Their combined colomentality continue to waste many initiatives aimed at facilitating a regional market in West Africa.
If nothing else, the recent events in Somalia, Rwanda, Sudan, Nigeria, Congo, Equitorial Guinea and Ivory Coast have helped remove the blight from the eyes of many Africans. By bombing the Ivorien military, France declared war on the country and compromised any "peace-keeping" excuses allowed their deployment by the UN. For its part, the UN has authorised France to use "any means neccessary" to contain the multi-tribal wars raging in IC. There have been six coups attempts herere since 1999. France now fights with its back to the proverbial wall. It is discredited with both government forces and rebel forces.
Just like USA in Iraq, France will almost certainly win a front-end confrontation with IC. However, it may find the cost of administering any subsequent peace exhorbitant. The same costs will apply to any misadventurous neo-colonialists scheming to step into France's soiled boots. The unhappy economics facing Europe and USA is the driving force behind the recent wave of aggressive foreign policy unto countries that fail to protect themselves. France is acting under the auspices of the wretched United Nations. USA and Britain is acting irrespective of the UN.
Eventually, the Africans will win encounters similar to Ivory Coast vs France. Then they still face the challenge of lopsided international markets. They can meet that challenge by building strong regional and continental trade among Africa's 700 million waiting customers.
___________________
Cocoa is grown on large plantations. The crops are intensely farmed, in mono-culture formation and with large use of phosporus fertilizer. Most of the planting, cultivation and harvesting must be done by hand. The plantations use large numbers of labour, many of whom are migrants into IC from neighbouring Burkina Faso, Gabon, Ghana and Senegal. The conditions of work are atrocious. Workers are badly beaten, poorly paid, and cast out at first sign of illness.
Plantation owners borrow heavily from the international banks based in Abidjan. The loans are collateralised by a promise to deliver the physical crop in the future and to receive cash-flows on delivery. Plantation owners receive some money upfront to use in paying for seed, fertilizer, and other farming inputs. The cocoa farmer gets paid. Not all farms are big plantations. A big planter or a big wholesaler may have supply agreements with owners of small-holdings.
On the basis of these anticipated cashflows, the headquarters of these banks create commodity derivatives such as options, futures, forwards and swaps. Commodity derivatives are financial instruments. They are bought and sold many times over in the commodity exchanges such as CBOT (USA), LIFFE (UK), Marche (France). Commodity derivatives are very, very big business in the international financial markets. Some of the buyers are cocoa processing companies such as Cargill, ADM and Phillip Morris (also a big tobacco processor). Other big buyers are end-users such as the chocolate manufacturers, including Switzerland's Nestle/Rowntree, Lindt and Barry Callebrut; USA's Hershey and Mars; UK's Cadbury, among others.
Buyers usually intend to take delivery of the cocoa. However, nearly 98pc of international trade in commodity derivatives is purely speculative gambling. The speculators buy on expectation of increased prices and sell on expectation of lowered prices. Prices are volatile and change often because the quality and quantity of commodities produced in any one year cannot be predicted in advance. Excess rain during harvesting, excess exposure to sun during drying, crop pests and a thousand other risks may destroy the quality of any year's cocoa crop. Fortunes are made and lost due to the ensuring high price volatility. In order to limit their exposure to potential loss, many speculators and end-users buy insurance instruments or hedge their market positions. Not many international insurance companies and hedge fund investment companies even bother to refer to Ivory Coast in their marketing material. They still earn fortunes off the breaking back of the cocoa farmer.
One such farmer visited Cardbury's processing plants in UK. He learnt that hardly any chocolate sold in the huge UK market for "chocolate" products actually contains cocoa solids. The typical 200g bar contains an average of 0.5g of cocoa solids. There are plans underfoot to replace even that small amount with vegetable fat. The big markets for real cocoa solids are the Swiss-Benelux manufacturers of luxury chocolates. The other big market are the manufacturers of cosmetics such as cocoa butter.
The diminishing market for cocoa solids is a trend that reveals changes in the dymanics of strategic international interests across Africa. Ever since the slave trade, many of the continent's economies have been heavily dependent on exports of commodities. Most of the exports were to then-colonial, later-imperialistic, and now neo-colonial trading partners: countries such as UK/Britain, France, Belgium and USA.
Europe and USA dominate global consumption of goods and services. Their markets are now close to saturation point. Their employees are living from paycheck to paycheck. They have too much of the everyday things they want to buy. They have little spending power left after deductions for bills and credit repayments. As consumption falls, so has competitive advantage in production. USA and many Europe countries can no longer compete with the nascent Asian countries in manufacturing, information technology or agriculture. Even as their incomes fall, they are faced with rising expenditure relating to unemployment support, foreign trade deficits, and domestic social obligations.
The diminishing share of Africa's commodities in world trade is producing less slush funds both for the neo-colonials and for the local akotileta elite who rule the commodity-exporting countries on their behalf. With less slush funds, it is becoming more difficult for the neo-colonials to maintain the heavy military and diplomatic resources needed to provide "assistance" to the ruling akotileta. Scenting the opportunity, previously oppressed people are now rising to challenge years of misrule and corruption.
The disaffection in France is particularly acute. For decades, France sold the concept of "one motherland, many colors". The motherland of course was France. The many colors were not equal. Nonetheless, Africans from Mali to Gabon professed to being "french first before African". Equally, religious brainwashing caused Islam worshippers to think themselves "muslim first before African" and the Christian worshippers to think themselves "christian, full stop". Their combined colomentality continue to waste many initiatives aimed at facilitating a regional market in West Africa.
If nothing else, the recent events in Somalia, Rwanda, Sudan, Nigeria, Congo, Equitorial Guinea and Ivory Coast have helped remove the blight from the eyes of many Africans. By bombing the Ivorien military, France declared war on the country and compromised any "peace-keeping" excuses allowed their deployment by the UN. For its part, the UN has authorised France to use "any means neccessary" to contain the multi-tribal wars raging in IC. There have been six coups attempts herere since 1999. France now fights with its back to the proverbial wall. It is discredited with both government forces and rebel forces.
Just like USA in Iraq, France will almost certainly win a front-end confrontation with IC. However, it may find the cost of administering any subsequent peace exhorbitant. The same costs will apply to any misadventurous neo-colonialists scheming to step into France's soiled boots. The unhappy economics facing Europe and USA is the driving force behind the recent wave of aggressive foreign policy unto countries that fail to protect themselves. France is acting under the auspices of the wretched United Nations. USA and Britain is acting irrespective of the UN.
Eventually, the Africans will win encounters similar to Ivory Coast vs France. Then they still face the challenge of lopsided international markets. They can meet that challenge by building strong regional and continental trade among Africa's 700 million waiting customers.
___________________
Links:
http://www.internationalism.org/wr/262_ivory.htm = France shows its real face
http://www.globalsecurity.org/military/world/war/ivory-coast.htm = Analysis of the crisis
http://www.newint.org/issue304/farmer.htm = Cocoa farmer from Ivory Coast learns the economics of chocolate production
http://www.wsws.org/articles/2003/may2003/ivor-m09.shtml = USA blocks intervention in Ivory Coast.
http://www.internationalism.org/wr/262_ivory.htm = France shows its real face
http://www.globalsecurity.org/military/world/war/ivory-coast.htm = Analysis of the crisis
http://www.newint.org/issue304/farmer.htm = Cocoa farmer from Ivory Coast learns the economics of chocolate production
http://www.wsws.org/articles/2003/may2003/ivor-m09.shtml = USA blocks intervention in Ivory Coast.
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