In a previous post, I had explained the concept of diminishing returns, and how diminishing returns sets in much quicker for agriculture, than for either manufacturing or services. I am aware of the fact that this is the kind of thing that is often dismissed as academic theory or which comes to the same thing, as being abstract. It is unfortunate that our education system is in such a state, such that it has imparted to us such a scornful view of such a powerful tool as theory but that is the story of a post for another day, though I will point out that theory, when done properly, provides powerful explanations for how the world works. Without it, world events can easily appear to us as being random in character, without any underlying order. Good theory or abstraction, exposes this underlying order so that the world can begin to make sense to us.
Today, what I want to point out is that the “theory” of diminishing returns recently became reality as regards cocoa farming in Cote d’Ivoire but before we get into that, perhaps a few facts and numbers are in order to give a picture of the cocoa industry. I will mostly be referencing a brilliant piece very recently written by Adam Tooze, a Professor of economics and geopolitics at Columbia University in New York.
Cote d’Ivoire, together with Ghana, have historically been responsible for about 60% of world cocoa output . West Africa in general, is responsible for about 70% of world output. There are some relatively new producers like Indonesia that have emerged as major growers. If you look at the graph above, you would notice that in 2010, that last year in the period covered, Indonesia’s output exceeded that of Ghana. My guess as to why this happened is that Indonesia, being a Newly Industrialized Country (NIC), is making use of industrial techniques to produce its cocoa, as opposed to the small-scale techniques used by the farmers of Ghana and Cote d’Ivoire. Based on that, I would expect Indonesia to eventually surpass Cote d’Ivoire in the not too distant future, particularly as cocoa farmlands in Cote d’Ivoire have reached their limit. Cote d’Ivoire is currently responsible for about 40% of global production . About 5 million tons of cocoa beans were processed into chocolate confectionary in 2020, generating around 130 billion dollars in revenue. Out of this, the farmers of West Africa only captured about 5-6% of the final price of a chocolate bar sold to consumers . The result of this in personal wealth terms is that more than half of Ivorian cocoa farmers and their families subsist on less than $1.20 a day . So for African governments looking to grow the wealth of the populace through farming, you now have an idea of the results. It should go without saying that for West Africa to capture the lion’s share it would need to move up the value chain and get involved in agro-allied processing activities on an industrial scale the way the global chocolate companies like Mars do.
Throughout the 20th century, there was a relentless drive to expand cocoa production in West Africa particularly in Cote d’Ivoire. Cote d’Ivoire today delivers at 40 more times the cocoa beans to the global market than were harvested worldwide in 1900 . As a result of this, together with the population pressure and the availability of land, farmland available for cocoa farming has reached its limits. It has gotten to this point because the gigantic increases in production of the last century were not achieved by using increasingly sophisticated technology and scientific techniques, which would have helped to increase the yields from a given piece of land, they were achieved by making ever more use of resources like land and labour, as diminishing returns set in on previous plots being farmed using small-scale methods. Now there is little or no land left to be put into play. To make matters worse, the situation has exacerbated the ethnic tensions in Cote d’Ivoire in recent years. I shall elaborate on this in my next post.
BEFORE YOU GO: Please share this with as many people as as possible and check out my book Why Africa is not rich like America and Europe. Thank you
- Tooze, Adam Feb 19 2023 ‘The closing of the Cocoa Frontier’ Chartbook #196 https://adamtooze.substack.com/p/chartbook-196-the-closing-of-the