By Jurin Katayama
‘Twas the day of Valentines, when all through St Andrews
Chocolates were given, to show that they were true.
Articles were flooded in all social media accounts,
With click-bait titles blaring “Chocolate shortage!” to get the view counts.
The culture of buying chocolates to illustrate love on an annual basis has caused the demand of cocoa beans to soar over the past few decades. In America alone, approximately $2.4 billion will be spent on buying chocolates for this year’s Valentine’s Day. The increased consumption has yielded production of countless articles blasting, “Chocolate could run out due to Worldwide Shortage of Cocoa” and made it seem that we are chomping away the final bites of the nearly extinct cocoa beans. Instead of being influenced by these kinds of articles and frantically rush to the nearest supermarket, let us peel away the layers of the clickbaits to evaluate the “shortage” of cocoa beans and the global response.
Defining the word “Shortage”
Many newspapers have used the word “shortage” to spread the story that the demand in cocoa beans has increased and that supply has decreased. Though the dictionary would define “shortage” as “a situation in which there is less of something than people want or need”, and therefore, the clickbait articles would have used the word correctly; in economic terms, this word is being used incorrectly by the media as it does not account for the price being set.
In economics, the word shortage means “when the price is low enough that the quantity demanded exceeds the quantity supplied” – it is essential to note that the price is the key element that most of the clickbait articles miss out. Without discussing the price, we are unable to establish that there is a shortage and are blind to the complete picture.
The Real Shortage of Cocoa Beans
Companies are pressured to maintain the low price of chocolate due to online uproar when they try to make any changes. Thus, the consistency of the low selling price in conjunction with the rising demand and decreased supply has resulted in a shortage of cocoa beans.
It seems that the increase in global demand mainly comes from China, where the rapid urbanization has grown the demand from $2.7 billion in 2014 to $4.3 billion in 2019. On the other end, the inconsistent rain, threats of disease, and pressure to sell them to buyers at a very low cost have influenced the producers to leave the market and move towards other industries such as rubber. Consequently, higher demand and lower supply with barely any movement of the price level yields an outcry of global shortage.
Attempts to Solve the Shortage
Naturally, the negative publicity of sugar has caused a decrease in demand in the UK – but only by 1% in 2015. Unfortunately, this fall in demand is not enough to counter the shortage and is definitely not in the interest of the companies. While the companies and the countries are focused on increasing quantity supplied of chocolates so that they could meet the high demand of the consumers while maintaining the low price, there have been many attempts made by the suppliers.
Firstly, in order to encourage cocoa bean producers to stay in the business, there have been technical advancements (such as the use of CRISPR-Cas9 to gene edit the crops) for the supply to survive the unpredictable consequences of climate change. Unfortunately, the technological advancements are not moving fast enough and is still too expensive for the suppliers that are in developing countries. Moreover, instead of increasing the price, the companies have made attempts to change the shape of their chocolate bar (a movement referred as “shrinkflation”) so that they could produce more quantities. However, reducing the size of the chocolate to about 10% while maintaining prices have been met with online outrage due to consumers feeling that they were being scammed by the companies. It has been made clear that changing the products while maintaining the price does not work in solving the shortage.
The best option to solve the shortage is to increase the price of cocoa beans – and this is the step that the governments of Ivory Coast and Ghana (the two largest cocoa bean exporters) are taking. In August 2019, the Presidents of the two countries agreed to coordinate and not sell cocoa for less than $2600 per ton in favor of improving the income of their local farmers. This announcement was met with positive response from the chocolate corporations. John Ament, Global Vice President of Cocoa for Mars declared: “We believe cocoa farmers should earn sufficient income to maintain a decent standard of living. The reality today is that many are a long way from this.” Although setting the price floor may mean that the price of chocolates that we see at the supermarket may rise in the near future, companies such as Mars may be cheering for the long run. The increase in farmers and production of cocoa beans ensures businesses for chocolate corporations and in the long run, the increased supply will have a potential benefit of a decrease in price over time.
Is it socially good to Solve the Shortage?
This evaluation has established that increasing the price level of cocoa beans would solve for the shortage as this would indirectly increase supply and would hopefully meet the high demand. However, increasing the supply of cocoa producers may not be the socially beneficial option. It has been observed that many cocoa bean farmers stay away from sustainable practices owing to their costs and time. As a result, the farming has yielded environmental consequences such as soil erosion and deforestation. Even if the attempts to end the shortage by increasing price would help those farmers that depend 70-100% of their annual incomes on cocoa beans, it is a double-edged sword as it is questionable if the benefits outweigh the environmental costs and thus the long-term wellbeing of the farmers.