Hi Alan,I am working with farmers in East New Britian on importing Cacao to the United States. The samples of cacao they provided were outstanding and we were lucky enough to find a corporate partner interested in purchasing the beans at a premium over normal PNG prices. I would love to chat sometime about travel to and within PNG. I would also like to hear more about your experiences organizing coops.But, to the topic at hand... I have good news. PNG beans trade at over the world market price for beans. It seems that the quality of PNG beans is recognized not only in in the ICCO rating (as meaningless as that may be), but more importantly it is recognized by the market. Generally PNG beans sell for a premium of around $400 USD over the NY price. That is not where near what Vene beans sell for but it is still a premium.Since Dec. 08 the price paid by Agmark and Garamut for dried fermented PNG beans increased by 38%. Honestly, the prices don't seem that awful given the market price and degree of risk. Maybe the data I have is from a very particular and slightly more competitive market. It seems that those who don't dry or ferment are in much greater peril. Farmers selling wet beans get about 1/3 of the price dried beans go for. I would be happy to learn more about the situation in PNG. If you have your own experiences to share or some articles I can read I would really appreciate it!Smoke damage is the #1 issue that plagues PNG beans and creates a certain degree of risk for anyone dealing with them. I know our partner/buyer is extremely worried about this even thought the samples provided were smoke free. They will reject the shipment if there is a hint of smoke.Unfortunately solar dryers have not caught on. The report Samantha links to below indicated that costly maintenance might be the issue. The farmers I work with did examine solar dryers that were available through one of the local nurseries and the CCI and opted instead to use a brick kiln. I don't have all the details on why they went this way. They did say that they felt the kiln is more reliable, and that they can go for weeks without much sun during the rainy season. The kiln they created is very well constructed keeping smoke from the beans. Alan, are your co-ops using solar?

Hello Eric,Im a pretty new artisan chocolate maker in Chile. (not from the bean, just transforming coberture)Here in Chile its very but very dificult to find good chocolate at reasonable price.the only company which sell "good" chocolate is Belcolade-Puratos and its pricey like 20 USD/ kgIm very interested in all the fair trade and organic chocolate.At the moment this is the only company selling such chocolates...But I read in one of your post that you knew beab to bar makers in Peru, Brazil, ecuador, Bolivia...have U got the contacts ?If not I have the posibility to buy chocolate from EL REY but I dont know about the organics y fair trade practices...I would buy 21USD/kgthanks in advance for any advice and good contact.Olivier

Dear Mr. Lucas,we are about to start a small chocolate manufacturing business (bean to bar) in Croatia/Europe. We have been working towards this end for the last six months, and have managed to make chocolate which people like, but only in small quantities. Our final goal is the production of cca. 40 kg per day, i.e. around 1 T per month.We would be happy to support you in your efforts to run your farm in the way you have described. Obviously, the best way to do this would be buying cocoa directly from you.So if you are interested in selling cocoa to us, please send us some information about your cocoa and, of course, your prices.We are interested in best quality cocoa only, preferably Criollo or Trinitario with a significant amount of Criollo blood (with very low acidity and astringency). If you can offer such cocoa, we would like to try it out first, so we would need you to send us some samples.In any case, we want to congratulate you on everything you have done for your employees so far and wish you and your employees success and prosperity in the years to come.Greetings from Croatia and best wishes,Walter Zufic and Lilli S. Perisic

Hi Samantha,Well firstly a very hearty thanks for your detailed reply. Just great to get as I've been on the 'how does the cocoa industry work?' track for the last 6-9 months and, while making progress, there are still a lot of unknowns. Surprise surprise.I'll work through your points and valuable comments and see how it shakes out. Hope we can continue this.Re exporting from PNG, yes this has all the hallmarks of somewhat of a 'closed shop' with some long established (read 'comfortable') relations in place. We (in the project) are working our way along this one carefully. We are helping growers to form co-operatives as the basis for progressing 'extension services' - which are pretty well now non-existent in our area at least - using a farmer-to-farmer basis. This has worked well in Madang with the cocoa growers there and we have high hopes for it in our patch. Another reason for helping growers to form co-ops is that they then become the base organistation which can apply (!) for an export licence from the Cocoa Board of PNG. So without counting our chickens this approach seems the way to go. We are working with the CoBPNG as a partner and feel we are at a stage where we talk the same language. So we will see very soon if this line of thinking 'works'. I can certainly let you know about what happens there.Re Markham Farms - just a bit of passing up-date, they did belong to the Swire group but have just been sold to a Malaysian firm. In the process they lost perhaps the best cocoa plantation manager around so it will be intersting to see how they go from here on. And they also sell beans to Michel Cluizel who then produce the "Maralumi" bar you mention. So that gives us some heart that small growers near by who produce the same quality of bean can come close to doing also. In saying this though I'm conscious of the great credibility gulf b/w Markham Farm and local small growers in the mind of buyers. But again here lies our challenge - to link up on an initial low volume 'trial' basis with buyers who buy quality beans and build the credibility from there. The trick of course will be actually getting to the 'trial' order.Re Quality: This is a very intriguing one for me as well. I gather in the final analysis the notion of what is and is not 'quality' is determined by the bean buyer. I've also heard here in Ecuador that a lot of store is put in the taste of the bean with some people (few) able to tell where a bean is from by the taste. I'm going to meet with some cocoa buyers in Germany soon and I'll be asking your same question: how do you determine the quality of a bean? So I can report on that too in 2 weeks.Re PNG cocoa and 'fine flavour' rating: Thanks for that reference. Very heartening to see PNG listed as 75% - the same as Ecuador. I'm intrigued to get the full story on the quality of the cocoa beans in PNG when I'm there soon. But for a few 'experts' there seems a dearth of knowledge on the quality front. Here in Ecuador they use the guillotine method in the field on harvesting to check for bean colour and disease and grading their crop, but that tool is unknown in PNG to my knowledge. But I'll check it out. When you mention 'EU' I gather you are referring to the aid agency whereas I think I was talkin about the European Union as a geographic market. But interesting though your point about the involvement of donor agencies in the cocoa industry in PNG and the less than astounding results. I'll be very interested to read those articles (and thanks). But the influx of 'helpful' agencies with varieties that might/do dilute the quality of the cocoa bean in favour of volume is silly in my view. If you have a quality product with limited supply with a level of demand from a market prepared to pay a premium they why would you ignore it and try to compete in the 'me too' market? My strong sense is this has been and still is PNG cocoa's dilemna - little unified agreement on the positioning of the industry internationally.Re image of PNG: Thanks for the further good news that 'scientists, chocolate connoisseurs, and ICCO are also well aware of PNG as a cocoa grower'. The info I've received recently here (2nd hand and always a danger) is that the buyers in Europe 'don't know' except Michel Cluizel of course! But I'm going to gather some info on that first hand soon too.Re the aid agency level of 'success' - I won't say anything about this other than the project I'm involved in is takin a private sector approach to building income in the District by taking a customer-driven approach to these industries. So that means seeing the cocoa/coffee/etc growers as customers on an equal plane to the Michel Cluizels of this world.In finishing Samantha I might just mention one of the biggest barriers we face is helping growers get access to finance - even microfinance. Banks in PNG and yes even micro-finance bodies see the growers as too much of a risk and impose overly stringent borrowing terms leaving the grower with literally no where to go despite a crop in the ground with an market value of $+++. So they are snookered and any buiding of their crops (e.g. even modest fermentries) is out of the question for the single grower - hence the co-op idea again. But this may (?) help explain why the Ausaid dryers exercise virtually failed. There is of course the not insignificant matter of whether the new dryers were the growers idea or 'imposed' (always a bad course).Pardon for making this reply so long Samantha but your thoughts and comments were so interesting they begged some wordy reply.

Hi Clay,Thank you very much for your help on that one. I've got two stats that might throw some light on the subject - one from Ecuador where I live at the moment and PNG where I work (don't ask about the flight time!!). I have it that Ecuador produced 130,000 tonnes this last year and I gather most of that is fine flavour and exported. PNG just topped the 51,000 tonne mark this year too and, while I'm guided by the IOCC rating, seems that most of that is fine flavour and also exported. So we have approx 150,000 tonnes there all up. I understand Dominican Republic is also in the fine flavour category but volume is small.So does this help us get closer to the volume and so the % that is fine flavour? Value your thoughts. And while not in the slightest an authority, like you, my money would be on the post-harvest/customer persepctive!Can I squeeze in another 'ask': I'm told by people here in Ecuador that either no one of the buying fratenity in the EU (at least) knows about PNG cocoa or they know of it but just can't access it (Duffy's dilemna comes to mind). Does any one share these views? Also while on the same topic, I've been staggered to not see PNG listed as a producer of cocoa let alone fine cocoa in almost all of the stats on world cocoa production. To top it off, I recently read an IOCC doc from the Executive Committee' of Sept 2006 on "A Study on the market for Organic Cocoa". It provides a table (Table 2) of world organic cocoa producers and under 'Asia and Oceania' as producing in total 762 tonnes of organic cocoa in 2006 - but it doesn't even list PNG who produces 51,000 tonnes (while not certified - our next challenge)!!! I 'm beginning to think it is a matter of 'nobody knowing' about PNG cocoa. To finish, I like the requirement of 3 years non-use of pesticides etc for organic certification. PNG cocoa growers haven't used it for several millennia!Very glad for your thoughts on the above questions.cheers.

Alan:There are a number of statistics about fine flavor cocoa production but if you do the math yourself you'll see that - at the commodity level as not all sales to small producers are reported - fine flavor cocoa runs to less than 10% of production (which would be around 300,000 tonnes of beans). Other stats I've seen put it closer to 3% which is probably closer when you consider blending which often happens in the country of original when buyers purchase from multiple growers and mix them together to dry on their patios.Also - and here's a real fun one, does unfermented 100% Nacional out of Ecuador count as fine flavor cocao? From a genetics perspective yes, from a post-harvest processing quality perspective? In my opinion no.Bean genetics is only one part of the fine flavor equation, which is why I tend to agree with the 3% number.:: Clay:: Clay


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Duffy, followig on from Langdon's comments and now yours it seems the cocao crop out of PNG is being sold to the firms in Singapore and Malaysia (over 57%) and then our suspicion is that it is on-sold to other local markets in S.E Asia. There is also a portion sold to Indonesian buyers who blend it with the commodity cocoa out of Indonesia. We have no hard evidence of this but a country who is producing 300,000 tonnes p.a buying more in from PNG who produes 51,000 tonnes does beg the question of 'why?' if not for blending - especially given the IOCC rating of fine flavour to PNG cocoa.So we are intent on trying to maximise the return to growers via the 'low volume/high return' route as you nicely put it and if this takes time (which it will) then so be it. That the bean-to-bar segment is very very small doesn't worry us unduly at the moment as production and quality issues are still needing to be worked through. What we think is at stake is the global positioning of the PNG cocoa industry - and that to the right segment (high end buyers) and a move away from the selling on a 'whoever wants it' basis. We are learning in any case so there is no huge hurry. We are also hoping that a few initial contracts with bean-to-bar buyers will represent some very important precedents to the growers who have been fleeced for too long now by exporters who have no interest in developing the industry and maintain a solid self-interest by keeping the growers in the dark on international prices and marketing approaches. So we intend to change all of that so that growers do become far more influencial in the value chain than they have been till now.Langdon, the project of building the cocoa industry is part of an NZAID project to improves incomes (by 10% at least by end of 2010) of rural folk in a district outside of Lae PNG. We are also building up the fish farming industry too with coffee to follow later this year. But it is the cocoa industry where we started because it has the greatest promise to raise incomes by a good measure.Can you perhaps confirm a stat I've heard - that the fine flavoured cocoa crop represents about 9% of the total world cocoa production. Sound about right? Be very happy to hear more and tell more about the project if you have any lead questions.

Hi Langdon,I agree with your point about bean-to-bar manufacturers taking a tiny proportion but I am trying to find links direct with growers - or as close as I can get - and struggling to find any way of doing this. The big dealers are looking for orders by the metric ton (or 20).Maybe a combination approach would work. As I've said before, I search "Fair trade" web-sites and only find where to buy retail products. Frustrating! If a grower, group of growers or co-operative sold direct then it might be like farmers in the UK selling part of their produce at a farmers' market - low in terms of volume but high in terms of profitability.Regards,Duffy

Hi AlanSounds like you have a good project going there. We would be interested to hear more about it if you care to share. Hope that it works out for you and the growers you are working with. Education for these people has to help and if you can find them direct markets then that is a really good achievement.What you say about shortening the supply chain is fair enough and the more the better. However only a relatively tiny percentage of the cocoa harvest goes to bean to bar manufacturers (and probably ever will). Therefore to improve the return to more growers, an approach that works within the existing system seems, to me, to have the best overall potential.Langdon

Langdon,I found your pricing approach very interesting re bringing greater value (= returns) back to the growers. I am involved in a project to build the cocoa industry in district of PNG and from my research so far - and I think you example bears this out - there are too many participants in the value chain between the grower and the retailers. I should add also that these participants are extracting value out of the chain for dubious 'services' with the net result that the full value/return back to growers is eroded.Our view is that we need to regain this 'extracted' value by dealing direct with the retailers - and even better when these retailers are also manufacturing on a bean-to-bar basis (such as Michel Cluizel) thereby shortneing the supply chain further. So we are actively pursuing this approach and hope that it makes sense to these end buyers as well by effectively shortening the supply/value chain.So while I see the merit in the thinking of returning some of the margin at the retailing end to growers, we believe that real power lies with the growers and we are workig to build their knowledge and skills re their understanding of the 'game' and how to play it.

Duffy, I agree that we will find the farmers, as you say, we are looking for them.As for trusting the middleman though, I am skeptical. I think that this kind of system should discourage "hearsay" and encourage verifiable fact at every step. If one or more people visit a farm, or co-op and see good practices (and documents them with photos or videos for instance), then I will have more confidence.Langdon

Hi Duffy,Sam and I have spent a fair bit of time researching this issue over the years. The rules vary from country to country. The US (due to its excellent freedom of speech laws) give the greatest protection to the person making the statement.The bottom line (from our research) is if what you are saying is:1. Demonstrably true2. Publishing the information is in the "public interest" (i.e. exposing deceptive practices that may harm customers)3. Is a personal opinion that you actively believeThen it will be virtually impossible for someone to successfully sue you for defamation in the US, UK, or Australia (these are the jurisdictions that we have researched). The Wikipedia entry on defamation is a good resource if you are interested http://en.wikipedia.org/wiki/Defamation Typically defamation is used as a form of bully. Most people have no idea of their rights and when faced with an enraged corporation threatening to sue, will just back down. So the bully knows that it is unlikely to ever have to go to court.In the case of the system that we are discussing it would be well worth while to find or hire some legal advice to clarify this issue as part of the system design.Contributors should be educate about what can and can't be said, and how comments should be phrased to avoid defamation. After all, we don't want to defame anyone. We want rational criticism, debate and transparency.Potentially controversial posts (where someone is rated low) can even be flagged for moderation before posting to help pick up obviously defamatory comments leaking in. On the flip side, anyone who receives a bad comment should be given the chance (and encourage) to defend themselves.With enough input the system will become a lot like ebay's feedback pages. Both the crank reviewers and the deceptive suppliers will become obvious thus allowing consumers at every level to make better choices.

Hi Langdon,I have no idea how the law works regarding freedom of speech, fair comment and slander. If I was very rude about, say, "premium" M&Ms and they insited the comment be deleted one could instead leave a note saying that they'd brought the lawyers in - leaving readers to draw their own conclusions on how that company react/over-react.Another point I wanted to make is that we will find the farmers because we are looking for them. We are trying to find good quality beans and to improve the fermentations etc. If the middleman who finds the beans tells us the farmer is looking after his staff and that he pays a premium to this end then we can expect to also pay a premium to buy form the middleman and can tell the people who buy from us about the farmer and what he's doing and where the extra is going to go.We start building little supply chains with some transparency. Word gets round that Farmer A is getting more because he's taking a little more care and the middleman will have more farmers seeing that this is sustainable way to grow cocoa.Regards,Duffy

Hi Duffy,My guess is that the biggest threat this system will face is the people out there who won't accept critical comment about their business or product. And rather than rebutting the comments logically and sensibly, will just threaten legal action against the person who made the comment and the operator of the site.After all, why is there inequality in this industry? Because people with power are happy to take advantage of people without power (usually growers). When someone comes along who threatens the status quo, then threats of legal action are common.The reason I am posting this comment is not to be discouraging, but to get a potential major issue on the table. Having bought it up, I will say that I think the problem can be dealt with. It requires that the ground rules for using the system are solid, with good legal advice backing up the rules.Langdon

Hi Clay,I don't think that it should cost a lot of money to operate a system like this. Software must be written and a website kept operational, but given that the information is being provided for free, the ongoing costs should be quite minimal.Langdon

I agree with Duffy on this issue Eric.What you have just done (post some information about your business and its practices in a central location) is an embryonic form of Duffy's idea. It's a form of transparency. The more we have the better. As Duffy said:"Just from this thread I now know more about one farmer and two producers and this information will be used if/when I next make purchasing decisions."Keep it coming I say If enough small players are involved, then the our customers can put pressure on the big players to lift their game since there is an alternative available.Langdon

Hi Eric,That is a huge problem, and there will only be so many people able or wanting to work on cocoa farms. Tempting as that sounds in an English winter. However, your question almost answers itself: YOU take care to pay a bit extra, and to try and make sure the farmers get a little bit more. You tell us, we buy from you. Your business could also feature in the virtual "farmers market" with a degree of openness and a statement of intent.Just from this thread I now know more about one farmer and two producers and this information will be used if/when I next make purchasing decisions.If you are meeting farmers occasionally and other purchasers are also meeting other farmers occasionally then maybe we can post this knowledge. A bit clunky, full of gaps and unstructured - but still very useful.Look at it from the viewpoint of the consumer (whether buying beans or chocolates or machinery) - how can they tell who they are dealing with? Visit each companies web-site? Not practical and not subject to much centralised comment or critical review. I will (soon, fingers crossed!) be looking to buy beans, in small quantities. How do I know? Would I rather buy Fair Trade beans from someone who wouldn't know a tasty bean from a piece of wood or someone who was more obsessed with quality and incidentally trying to do the right thing.it needs a light touch and someone will take advantage and con us but it might help push the move to quality and responsibility.Regards,Duffy

Here's to Fair Trade for chocolate makers, too.


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Well, I know that you are all trying to find a way to globalize the true "Fair Trade" efforts and I applaud your efforts, however, that is something that will never come to pass due to the large players involved. Keep trying though and hopefully we can at least improve it. I buy cocoa beans from 19 countries now and 37 farmers or coops. Most of these are not fair trade sources so unfortunately I am unable to sell "fair trade" cocoa beans. Many people are only interested in that stamp regardless of what it means and like you have all said, in most cases it means nothing.What I do is make sure that each source I buy from gets better than fair trade prices for their beans. I may not be certified but I every source I buy from, farmer or coop, gets better than fair trade price. It may be a small start but it is something I can do and many of the chocolatiers I work with are all trying to do the same thing. Hopefully, our efforts will not go unnoticed even though we are not "fair trade certified"I am watching hopefully. Maybe some uniform system can be devised that is fair for all involved. One quote I have from a great friend of mine who buys only fair trade beans and pays a premium for them about fair trade is this "Everyone wants fair trade, stores, farmers and consumers. Where's the "fair trade" for the chocolate maker?"
updated by @eric-durtschi: 06/20/15 11:41:36

Duffy:This is an interesting idea, but you need to take it a step further, which is how does the benefit the farmer in Ghana - or wherever? It's easier to see how a system like the one you outline above works where everyone has electricity, Internet access, and computers, but that covers only a very small fraction of all the cacao farmers in the world.In the end, money and/or goods have to change hands and there has to be a mechanism for reliably getting the benefits to the farmers. As I mention in the comment on my experience in Venezuela, there are many cultural challenges to overcome and they will vary from country to country and region to region. You also have to keep in mind that farmers have heard it all before and are tired of promises that never get kept. There's a lot of well-deserved mistrust out there.About two years ago I started noodling around with what I thought of as a "Direct Trade" certification using a group I created - the New World Chocolate Society - as the vehicle. I did get a bit of interest from several quarters but I was not able to figure out how to finance the effort to get it started. [One thing people may not know about Fair Trade (as in FLO - the Fair Trade Labeling organization) is that it is not (or has not been at least was not until recently) self-sustaining. In other words it did not cover its overhead costs through licensing fees: They relied (and may still rely) on corporate and other forms of support.]One element of Direct Trade that people seemed to really like was that "voluntourism" was a key component of being certified. Certified Direct Trade growers/co-ops had to provide a way for outsiders to come and work on their farms in order to be able to witness first-hand what was going on. My feeling is that having a couple of hundred eyeballs a year spread out over many months is a more "effective policing effort" than relying on a single visit by a single inspector once every year or two. Besides, volunteers would pay the farmers for the opportunity to voluntour, making it, in effect, a revenue stream for the farmer/co-op.I still think that there is room for a "fair" alternative to "Fair Trade" and there is no reason why - given the membership of this group - that we can't figure something out, including how to finance the startup costs.


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Hi All,The idea that I proposed (that we generate a certification system of our own) would need thought but might work in a similar way that Tripadvisor does with hotels. Visitors can add comments to a listing, for example. Some points:- transparency. If I buy your produce I want to be able to ask questions about it, possibly in detail. I may wish to have links to your company on my web-site, I may wish to share your answers, I may wish to say that I think what you are doing is not ethical or that your chocolate is nasty.- peer pressure/approval. If I were to buy beans then I would be asking first if the people who I know take the issues of quality and ethics seriously, to see if they could fill my requirements. If we had a list of suppliers each with (hateful phrase!) a mission statement then we could try and fit our needs to those of the supplier. In a different context, if you were investing in "green" shares you might not want to invest in an arms company but be less bothered about cigarettes - there are always shades and differing definitions.- if I buy beans from Jim and then find out that he actually has no farm at all and just ships cheap beans from the next-door farm then I post this and he can't edit. He can reply saying "look we had a disease attack I have no production for 2 years and I'm changing the farm next door round to working in a decent way" and we apply our judgement.- there is no reason to apply this system solely to suppliers. Think of it as the web/chocolate equivalent of a farmers' market. Each company stands there proud of their produce, enthusiastic and ready and willing to ask questions. Again, I can try something and write in to say it might be organic, it might be ethical but it tastes horrible so they need to change something fast.- this might/should encourage to start publishing their supply chain on their web-site. It will add the "story" and lead to a greater awareness of what goes on and what the issues are.- people buy organic and fair trade because it is one of the very few ways that you feel that you can send a very small signal out that some people do care and are willing to pay a little extra.- it would all be based on trust which you assume is a given until someone takes the mickey. Some will get through the net and some will get caught. If we make it all too rigid then we end up trying to recreate the "organic" and "fair trade" labels that we suspect are only the first step in raising consumer awareness of the complexities involved in supporting sustainable agriculture. The internet is a powerful tool. If the forum is recognised as having certain good qualities and the postings support a product or suplier then it will be used to promote the product or supplier. Then peer pressure/approval becomes more desirable and then, I guess, people will start trying to hoodwink us!Is this feasible? Is this forum the right place? I'd like to know more about all producers anyway!Duffy

Interesting thought Clay. If we manage to make it to Bolivia, then perhaps we could do both. No guarantee though as money is always the issue.Langdon

Hi Clay, I will post a couple of replies as there are a few issues to address in your post. You asked:"how do you envision getting retailers to agree to pay premiums and then how do you see the mechanism for getting those premiums to the farmer?"The answer that our friend here in Sydney has developed is that his organisation handles both ends of this problem. He buys the beans at world price (so the status quo is maintained through the supply chain). He then arranges shipping, distribution etc. When he sells beans, his customer (as part of the sale contract) agrees to hold back a percentage for the grower.The top-down margin money then goes into a trust fund from which his organisation returns some to the growers as cash and more in developing services like schools, local infrastructure, business and agriculture education.This is something of a simplification, but that is the basis of how his system works. The "top-down" premium doesn't always come right from the top (retail), but every step in the chain that the premium skips can return more dollars to the farmer.It is a novel approach, and one that requires more effort to implement than a bottom up certification. However it has the added advantage of allowing for transparency along the whole supply chain.What this system does not do is make any provision for inherent agricultural, or ethical standards (as organic and Fair Trade do). That is another longer term goal of the project to pick up those aspects as well to try to address the problems that Jim has pointed out.You could say that the aim of this project is to combine the (financial) power of Trade with the ethical goals of NGOs. It has the potential to be very effective system in my opinion.Langdon

Langdon:I have a question about the mechanics of the top-down process ... how do you envision getting retailers to agree to pay premiums and then how do you see the mechanism for getting those premiums to the farmer? While the bottom up approach returns less to the farmer, in theory it should be easier to get the money to the farmer (though in practice, as we know, it's not).I could imagine it working in the case of a private-label chocolate for a large chain like Whole Foods, but I can't imagine how it might work for a manufacturer selling to hundreds of outlets.I have always been a fan of Shawn Askinosie's approach but I don't see how it is scalable to hundreds of thousands or millions of farm families.I went with Shawn on his first bean-buying trip to Soconusco and to Venezuela and I can tell you from personal knowledge (and I think you'd agree based on the time you spent with us in Ecuador) that he is totally sincere and committed to the health and welfare of the farm communities he buys his beans from. In Shawn's case, Askinosie Chocolate practices open book accounting both in the factory and with the farmers. Shawn visits the communities where he buys his beans once a year and shows them how much money he made from the sale of chocolate made with their beans and then write a check for 10% of the profit. Farmers get paid for the beans when they are shipped and they receive a bonus. When I was in Soconusco with him, I also heard him make two additional offers: 1) He would pay the equivalent of a US$600 (about 6000 Mexican pesos at the time) bonus on signing the contract that would be put toward improvements in the co-op's fermentation facility and that could be used for all of the co-op's beans not just the ones they were selling to him; and 2) He offered to buy an option on a crop that would not be available for two years - he wanted the right of first refusal to buy none, part, or all of the crop and would pay for it now, no strings attached.But sometimes the culture of the cacao farmer in a country can get in the way of making things better for the farmer. Immediately after leaving Soconusco Shawn and I traveled to the Barlovento region of Miranda State around the town of Rio Chico. Not far from there we met with a farmer to negotiate for beans. The terms the farmers wanted were FOB the farm, in other words cash before we load your truck. We tried for hours over the course of two days to see if they would accept other terms - terms that here in the States we would jump at - if they would allow us to get the beans to port in order to assess their quality as Shawn did not have an agent in the country. In the end, he offered 50% upon signing the contract (six months before the beans were to be picked up), 25% on pickup, and the rest when the beans checked out okay and before they left the country - plus a bonus on signing the contract to build a drying pad and shed.The answer was always no, 100% cash on pickup. Even getting the farmer's pastor involved did not change the farmer's mind. We left marveling at the difference in sophistication of the groups we were negotiating with. One understood the worth of an option contract, the other couldn't conceive of any form of financing - even when the financing worked to their advantage.This brings me to one of my major disappointments about certifications like Fair Trade, Fair for Life, Rain Forest Alliance, et al - they are culturally insensitive. They impose the same set of rules everywhere in the world, the same commodity-based pricing structure everywhere in the world. In my mind, this is one of the reasons these programs will never be as successful as they need to be in order to offer meaningful benefits to a meaningful number of farmers.


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Langdon:A trip to Jim's farm is one the locations I am looking into traveling to in 2010. I know that there is a lot of interest in Bolivia ... hmmmm I wonder if I can do the two of them back-to-back?:: Clay


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@DiscoverChoc

Hi James, I tend to ignore the other players in the chain as many of us are first world, or wealthy/educated third world companies or individuals (therefore we should be able to look after our own interests). However your point is taken. The supply chain should be fair for all involved.I really love the thought of brining the story of the farmers out and making it a part of the product. Jim's story is awesome. I may never get to visit his farm, but I feel like I have had a small holiday just hearing about it and seeing the photos. As consumers we have so little knowledge of where our food comes from these days. I would love to see the farmers being given the credit that they deserve.Langdon

Hi Devil, I just re-read my last reply and think it may sound a bit abrupt. Just wanted to clarify that I think you are raising good points and am not trying to shut you down or anything. Keep it coming Langdon

Hi Duffy,This idea of "incidental" assessment of cocoa farms is an interesting one. Sam and I spent some time talking it over on our walk this morning. I am not about to shoot you down in flames, I think that the idea has merit. There are plenty of stumbling blocks and issues with a system like this, but the fundamental concept is sound in my opinion.Ultimately, what you are talking about is transparency. If farmers and co-ops are prepared to allow people to see what they do (and photograph it), then there is pressure on them to do the right thing (i.e. not employ child labour, ferment and dry cocoa fully etc). Jim is already doing this off his own bat by posting photos here. The same applies to manufacturers. As manufacturers we (Tava) try to be transparent. If people want to know where our cocoa comes from, then we tell them. If they want to know that our factory is nut free, then we are happy to show them.Ultimately certification systems are about trust. The logo on a product tells you something about its origin. The big downfall of this though is that you have to be able to trust the label (and know what it really stands for!). Sadly that trust isn't always warranted as big corporations want weak standards (so that they don't have to pay more) and there are people out there who see the opportunity to make money from setting up certification systems with nice logos, but no substance to their standards.So, I think that it is definitely possible to set up a system like you suggest to register farms (that will allow visits), then allow visitors to report on what they saw. The key issue here will be that the visitor has to understand what they see and know what to look out for (not easy, but not impossible). Frankly, I think that it would be as good a system as any and be better than some.The same system could (should) also be applied to manufacturers ...Langdon

Hi Jim,You have blown me away once again with you scope of vision. To elaborate as requested: the list of players I mentioned above is what I would expect for us (Tava) buying cocoa in Vanuatu and selling beans on to the whole food industry here in this country. The chain could be longer, but is unlikely to be much shorter. Sam and I try to make direct sales to the customer where possible to eliminate the last two links in the chain (we act as the manufacturer in that scenario).As a manufacturer we receive beans in 60kg hessian sack. The beans are pretty clean, but we still have to process them to remove dust, broken beans, any small beans that crept through the grading in Vanuatu and any extraneous matter like placenta material that may have made it into the finished product. From what you say and the photos that you posted I can see that you are aiming to reduce these requirements to zero, or as close as possible, which is great! This is value adding, something that most farmers (even in the first world) don't understand, or even care about.As a manufacturer, Tava produces and sells cocoa in all forms: raw beans, roasted beans, raw nibs, roasted nibs, bulk cocoa liquor (just ground cocoa), and finished chocolate.A wholesaler adds no value to the product, but they serve as an easy supplier for retailers and resteraunts who only want to deal with one or two suppliers. We have found it very hard to get retailers to deal with us direct. So the wholesaler is difficult to avoid rather than a necessary player.I think that you are absolutely doing the right thing in having your own export license. Not being at the mercy of buyers is one of the key factors if getting a better price for cocoa - as you are well aware and have mentioned. Given that you can manage transport and export yourself you can offer manufacturers a lot of security and stability in their bean supply. And confidence in quality and ethical standards.You are spot on about providing an example through what you do for small growers. One of the (very) long term projects that we are looking at is helping grower communities in the South Pacific by building business centres with them. A business centre would provide education and information about cocoa processing and production (to help improve quality and quantity), education about the industry that they supply (so that they understand where their cocoa goes and what happens to it), communications via Internet, phone, and fax (to give them access to pricing information, customers etc) and more. I think that what you are doing can serve a similar purpose for growers in your area too.I don't know if I have answered your questions above, just let me know if I haven't.Langdon

Hi Devil,The nice thing about the top down system is that the middlemen don't actually loose any money, it's just that they don't get more as a result of the certification. This is a big benefit as middlemen who feel threatened can do some unpleasant things (usually economically) to growers (which we have heard tell of in Vanuatu).It's a sad day when compassion is at odds with good business (or profit). I look at this situation and think that a manufacturer who looks after growers (his/her supplier) is working to ensure the companies long term success even if it costs some profit initially. But then the current economic situation really does show how little most companies think about the long term.

I'm glad this thread was started. Thanks for sharing, Jim.I've been interested in working through the ethics of chocolate. The trouble is that the chain is not terribly transparent. Chocolate exchanges many hands before it finally reaches the consumer. I think as Sarah points out, consumers are willing to make the leap for ethically produced food.Langdon, you have an interesting point; however, I'd also like to see fair/ethical trade to all within the chain as well. It would be interesting to know what costs are required along each step of the way. Certainly, it seems that the farmer is the one who is getting the short end of the stick in your certification process example - the costs (especially for a higher flavor product) seem higher at this step. Many thanks to Jim for providing information regarding the farming step.

Landon,I would appreciate having an elaboration on the various players in the models. I am particularly interested in the role of the "manufacturer" that cleans, packages.....Do they turn the bean into chocolate mass or other form beside beans? Same question for the "wholesaler".Our business model is to produce a product that will be delivered directly into the hands of the bean-bar chocolate facility. To this end, we have obtained import/export credentials and are able to move cacau to any location. To make the model work, it is probable that the beans will move by container to a central distribution point. The beans will leave here in a state that does not require additional manipulation prior to use. depending on legislation of the point of origin and point of receipt, there could be requirements for an "offical" clearing agent.If the model is successful, we will have managed to remove many of the "50%" "200%" stones in the road. The resultant direct sales and purchase activity should increase the producers income and reduce the cost to bean-bar parties. I've already made shipments using this method and feel very confident it works.Although the system works only for medium and large scale producers, it provides an example for small farmers that wish to form co-ops and duplicate the model. I'm of the opinion, we need to help small farmers understand the effectiveness and power of unity.Best regardsJim Lucas

Hi All,We are the ones who may be able to change things - probably only in a small way but hey it might work. We are the people who buy/eat/make chocolate, we are the people who use this forum and make calls based partly on what we read here.Could we start our own system? If someone "we" trust had been to see Jim and noted that his workforce seemed well-treated, his methods looked good and that quality was a prime concern then told the rest of us we could use that judgement when making purchasing decisions.The problem isn't at the consumers' end as they are just trying to do a little bit to help the welfare of the farm workers. It sounds like the issue is partly caised by intermediate parties doing whatever they can to increase their share.Of course I'm being impractical but if everyone who'd visited a farm listed the good points and points of concern then maybe we could start something. It's surely in all our interests that we pay a fair price and that quality starts to take a more important role. The risk is that eloquent English-speaking people will shout louder than anyone else but if we started a database then maybe we might help. A little.I'll sit back and wait to be shot down now!Duffy

Devil,You may well be right about the 100%, in which case top down becomes even better for the farmer.I have to disagree though on your last point about vertical integration. In my experience first world companies who own or control the means of production in third world countries rarely put the welfare of their workforce before their own profits (think Nike, Union Carbide etc).I will say again that what I think will produce the best outcome for growers is compassion and partnership (like Askinosie chocolate).

Jim,Firstly, thank you for sharing your story. Taking what you have said at face value, what you have achieved is nothing short of astounding. Your social equity development is impressive and your dedication to your workers and their families is outstanding.What you have witnessed first hand in Africa supports the things that we have read about cacao growing in Africa and is worse than what we have seen ourselves in the South Pacific and Ecuador.Regarding certification standards, Samantha is on record regarding the Rainforest Alliance (RA). RA in particular seem utterly cynical (it is little surprise that big corporations like McDonalds are so keen to support them). Other certifications (in my opinion) have their merits, but as I said in Clay's thread (see link below) on this subject: they often fail (through exclusion) the people who need them most. http://www.thechocolatelife.com/group/givingback/forum/topics/19789... Also as I mentioned in a post here the other day, I believe that possibly the best way for growers to get enough money for their crop is for a percentage to be taken off the top (at the wholesale, or retail of chocolate) and paid back to them, rather than adding a percentage at the bottom, which just inflates the retail price (this is essentially compound interest at work) thereby putting more downward pressure on the cocoa price.Here is a simplified example to illustrate the point: Certification based premium of 20% to grower: -----------------------------------Grower sells cocoa for $1.20 per kg including 20% certification premiumBuyer adds 50% and sells cocoa for $1.80 per kgExporter adds his handling fees and profit 50%, sells cocoa for $2.70 per kgManufacturer value adds cocoa beans (cleans, packages etc) and sells it to wholesaler (200% increase) for $8.10 per kgWholesaler adds 50% and sells it to retailer for $12.15 per kgRetailer adds 30% and sells it to customer for $15.80 per kgGrower gets a total of $1.20 per kgFinished price to consumer is: $15.80 Top down premium of 20% from retailer: -------------------------------------------------Grower sells cocoa for $1 per kgBuyer adds 50% and sells cocoa for $1.50 per kgExporter adds his handling fees and profit 50%, sells cocoa for $2.25 per kgManufacturer value adds cocoa beans (cleans, packages etc) and sells it to wholesaler (200% increase) for $6.75 per kgWholesaler adds 50% and sells it to retailer for $10.13 per kgRetailer adds 30% for themselves plus 20% premium for the grower and sells it to customer for $15.19 per kg (that'sGrower gets a total of $3.03 per kgFinished price to consumer is: $15.19 The grower gets almost three times the price for their cocoa, consumer pays less as well.The advantage of this system is further magnified when significant value adding is involved (like manufacturing chocolate, rather than just selling beans). A friend of ours here in Australia is working to build just such a system for cocoa growers in the South Pacific.I agree with Jim that commodity trading of cacao can not deliver reliable fair returns for growers. Given that the system exists and is so entrenched, I think that we need to look for other ways (like the idea above) to fix the problem. As artisanal and small scale manufacturers of cocoa products we are in a position to do this (just look at Shawn Askinosie, he is out there doing it right now).The poorest farmers need support (in the form of education, information and reliable markets) and compassion from the people like us who buy and process their cocoa. "Free market" economics is clearly failing them.Thank you once again for your post Jim and I hope that the effort and investment that you have put into your farm leads your family and workers to a bright future.

Sarah,Thanks for the feedback. I launched the subject to have persons as yourself look at the "business end" of FT.The majority of FT advertisement is coming out of co-ops which are normally 3rd party managers of produce gained from small farmers. In my visit to Africa, the small producers had no idea what the world market price was and were receiving very low percentages of current prices. I view co-ops with a very jaundice eye until it can be established that they are in fact a group of farmers that have banded together to improve their lot. For the greater part, Small farm holders normally operate day to day and cash flow calculations are made by counting what they have in the pocket. This is the primary reason for "trash" cacau flooding the market. If the farmer has 100kg of cacau on hand, his urgency is to get it to some market as soon as possible. Fermentation, drying and packaging are not even on the radar.I hope many opinions surface as a result from this attempt to shed some light on the FT subject.Best regardsJim Lucas

Jim- thank you for posting your perspective. I have been trying to read everything I can about the issues of FT and Organics related to chocolate and thank you for your voice in the discussion.What I see in my shop is that people are really trying to do the right thing when they seek out "Fair trade" because there is much talk about the ills of the chocolate growing industry, fear about child labor violations, slave labor etc. and not a lot of information available about the subject. You can't fault people for trying to be ethical in their purchasing and it really is hard for a general consumer to "know", so they rely on certification labels, I think.So, I appreciate the discussion and look forward to more information as I try to get a clearer picture about the "fair trade" and organic certification processes. I appreciate the original intent behind trying to establish some guidelines for "fairness" and also understand the potential for certifying boards to be corrupt or irrelevant. What I look forward to is more discussion on the subject so that I can get the big picture and I am very appreciative of what you have added to the conversation, Jim.

Jim:This is a phenomenally valuable and interesting post and I am looking forward to a spirited discussion here not just about the issues involved, but of ways to address the issues in meaningful ways.For several years, I have been trying to let people know just how unfair "Fair" trade can be .One of the reasons I like to lead groups to cocoa growing regions and give them first-hand experience is so that they can experience personally the conditions that farmers live and work in, just how much work it is to grow cacao and process it into cocoa - and just how little the farmers receive in return.:: Clay


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@DiscoverChoc

In 1995 I closed a profitable business in the USA, sold a very nice house, packed some shipping containers and moved to Brazil to become a cacau farmer. The radical change of lifestyle was taken because my Brazilian born wife, youngest of a family of nine, was the last hope for saving a 2500 acre cacau farm that had been abandoned by other family members.Our new enterprise consisted of +-60 workers, 26 living with families in free farm residences. There was no residence for the owners since it was customary to live in a distant city and rely on the farm administrator to deal with the disorganized mess. We moved into an 800 sq foot house intended for the guy that milked cows. Since all the cows had "vanished" due to disease, theft and slaughter, there was no cowboy.There were no written documents that listed workers, water was taken from a river that passes through the farm, telephone service was unheard of and hand tools consisted of one broken point screwdriver. The administrator, 60 years old, born in the farm property, had been feuding with family members for more than 20 years.. A real mess.Today, the farm operates with 26 workers, has water and indoor sanitation in each house, has been completely mapped using GPS and Autocad, maintains a repair shop that is not equaled for 500km and electrical power has been installed in every residence, shop and work area. With no exception, each farm residence has parabolic antennas, color television, refrigerators and in some cases washing machines. In 2000, I designed and constructed a farm owners residence, installed radio link telephone and satellite internet. We have begun to feel like it is a true home. We are in residence at the farm and have been since 1995.The workers are by Brazilian law, registered and receive all the benefits legislated by the Federal Government. Includer are:* 44 hour work week* 1-1/2 premium for extra hours* double time for hours worked Sunday* 30 days per year vacation with 33% bonus for the month* 1 additional month salary called 13th month salary each year* each child under 14 years receives a monthly salary equal to 5% of the worker* each worker has government retirement plan which is paid monthly by the farm valued at10% of gross salary* each year the worker receives an additional month salary deposited for severance, if andwhen it occurs* a primary grade school is maintained in the farm at farm owner expense* government managed medical care is paid for from a 5% salary deductionThe current salary is R$480.00 which equates to USD 220.00. Considering all the legislated benefits and the fact that the worker has 30 days vacation, 10 legal holidays and 1-1/2 days per week off....the hourly salary comes to something in the order of USD 1.80 or USD$ 15.00 per day worked. Failure to meet these obligations result in legal actions which can result in the farm being auctioned to meet the "AGRICULTURAL REFORM LAWS".I was fortunate enough to have timed my arrival in the farm with that of "Witches Broom". The devastation caused by the disease is almost incalculable. In 1980 our farm produced 270 tons of beans. The year of 2000 closed with 30 tons. The application of technology, planning and very hard work, we closed 2008 with 60 tons and prospects of a similar harvest in 2009. Our farms are considered to be a model for management, social awareness and ecology...BUT...not a single cent of profit has been recognized and personal out of pocket prop up loans have mounted to something on the order of USD$300K.Is there someone with more need for FAIR TRADE, I would like to meet them. I;ve had untold meetings and proposals from organizations SELLING certificates for FAIR TRADE, ORGANIC, RAIN FOREST ALLIANCE. Each has been turned away because it provides absolutely nothing towards the production of cacau, welfare of workers or ecological stability of our 500 acre Atlantic rain forest.In an attempt to more fully understand the world of cacau, I made a trip to Ghana, Nigeria and Ivory Coast. The squalor and poverty I witnessed certainly did not substantiate the claims made by third party certification agents. Most of the small farms were hand to mouth existence and the only prosperity was achieved by 3rd party buyers that collected rural production. This production ultimately settled in the warehouses of multinational giants and finally on to the shelves of shops across Europe and the USA.The web is filled with discussions regarding FAIR TRADE but most of the authors have not an inkling of the issues that prohibit FAIR TRADE. As long as commodity buyers in London and New York and Chicago control cacau prices and movement....FAIR TRADE ARE ONLY TWO WORDS!!!
updated by @jim2: 04/15/15 01:11:42