Cocoa is a classic Third World cash crop. It is produced mostly by small, poor farmers in Africa, while its products - chocolate and sun tan oil - are consumed by rich consumers in North America and Europe. A few West African economies are highly dependent on foreign exchange earned from cocoa sales. It has therefore been targeted by Oxfam's Fair Trade initiative, and IITA's Sustainable Tree Crops Program (STCP) is launching an effort of become more aligned with consumer's social preferences. The most obvious dimension to addressing consumer demand for cocoa products is to insure provision of high quality products, which has become problematic since structural adjustment programs have dismantled the African parastatals governing cocoa production and exports. Cocoa production would also likely meet requirements for organic certification in many instances, but legitimately obtaining that certification would be costly. Cocoa also offers several dimensions through which consumers might, by their market choices, insure more socially responsible outcomes. Both the STCP and Fair Trade initiatives focus on the potential for poverty alleviation and on achieving sustainable development for poor African farmers. Those farmers are stewards of the rain forest, and their production decisions can determine whether cocoa remains a rain forest friendly crop, so global environmental impacts can also be influenced by cocoa markets. The most recent, most widely publicized, and most intractable issue to hit the cocoa market is the allegation that child labor may be used on those poor African cocoa farms. The first objective of this paper will be to describe this situation, and the problems of cocoa markets, focusing on what has been happening in Africa. Particular attention will be paid to the problems of implementing structural adjustment reforms, and the increasing role played by multi-national processors as they backward integrate into the African marketing systems. Then the Fair Trade and STCP initiatives will be described. Finally, a conceptual examination of marketing systems between the African cocoa farm and the chocolate manufacturer, emphasizing institutional arrangements, is used to assess the likely success of these initiatives in achieving their social goals.


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