Cocoa And Coffee

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Cocoa And Coffee

  1. 1. Agri-Sector Policy and Public Administration Reform Project Trinidad Agricultural Sector Reform Program Ministry of Agriculture, Land, and Marine Resources Government of the Republic of Trinidad and Tobago Cocoa and Coffee Industry Board Needs Assessment Mr. Daniel Duris, Consultant Fred Woods, Project Leader Ronald D. Knutson, Principal Investigator The Texas A&M University International Trade and Development Series ITDS-TASRP Assessment Report 00.99-6.16 Agricultural & Food Policy Center Texas Agricultural Experiment Station October 27, 2000 College Station, Texas 77843-2124 Telephone: (979) 845-5913 http://trintex.tamu.edu
  2. 2. The international trade and development series is designed to report the results of trade and development projects undertaken by the Agricultural and Food Policy Center at Texas A&M University. The series may include a number of reports related to a particular project or country, produced under the leadership of AFPC faculty. Alternatively, it may involve individual reports or particular topics for which AFPC faculty are either doing research or providing technical assistance. AFPC welcomes questions, comments, and discussions of the material contained in these publications and their implications. Address such comments to the author(s) at: Agricultural and Food Policy Center Department of Agricultural Economics Texas A&M University College Station, Texas 77843-2124 Or call (979) 845-5913
  3. 3. Executive Summary: Cocoa and Coffee Industry Board Needs Assessment Despite government efforts to rejuvenate, both the cocoa and coffee subsectors of Trinidad and Tobago are in a state of decline and are in danger of disappearing. The objective of this needs assessment was to evaluate these subsectors and their future, with a major emphasis on the role of the operations and performance of the Cocoa and Coffee Industry Board (CCIB). Recommendations 1. Liberalize coffee trade immediately. Coffee should be removed from CCIB, and its trade should be liberalized. Direct sales from producers to industry buyers would simplify the structure and increase efficiency. An interprofessional committee is proposed to assist in the transition and in the longer run to promote coffee production and play a political role in encouraging the maintenance of appropriate market- oriented support services (research, extension, grades, standards, and market information) by the Ministry of Agriculture, Land, and Marine Resources (MALMR). 2. Liberalize cocoa trade gradually. A stepwise program should be implemented to liberalize trade in the cocoa subsector. As in the case of coffee, an interprofessional committee with a majority of producer representation should be developed to aid in the transition as well as to promote the industry in the longer run. During the phase- out period of 3-5 years, private individuals should be permitted to purchase cocoa from producers and export directly themselves. During the transition period, the role of CCIB would gradually change to one of maintaining and certifying quality to serve niche markets. 3. Price according to end-use quality. The practice of pricing according to grade should be phased out in favor of a single base price for bulk cocoa meeting minimum
  4. 4. ii standards for defects and moisture. A system of quality-based premiums and discounts based on moisture and defects should be established to complete this new system, which would be more appropriate for Trinidad’s cocoa beans. 4. Develop farmer associations. The development of producer associations on a village basis should be encouraged for both cocoa and coffee. These local associations should then be federated into a district/county and national structure. 5. Emphasize on-farm result demonstrations. Extension programs should emphasize on-farm result demonstrations and encourage cultural practices with demonstrable economic gains. 6. Integrate market-oriented production and economic research. Research needs to be practically oriented to satisfy social and economic requirements of niche markets. A steering committee is proposed to monitor research programs in cocoa and coffee. 7. Integrate production into rural development strategy. Cocoa and coffee production need to be integrated into a rural development strategy that takes into account all crops that can be profitably produced in various farming systems. 8. Take a census of producers. A census of all cocoa and coffee farms, whether abandoned or not, should be completed as a joint undertaking of MALMR and CCIB. 9. Survey industry. A survey of cocoa buying agents, brokers, and manufacturers should be undertaken by MALMR and CCIB for the purpose of better understanding market requirements.
  5. 5. Cocoa and Coffee Industry Board Needs Assessment Table of Contents 1.0 Introduction .......................................................................................................................................1 1.1 Brief history of cocoa cultivation in Trinidad ...................................................................................1 1.2 Current production situation..............................................................................................................2 1.3 Purpose..............................................................................................................................................5 1.4 Needs assessment process .................................................................................................................6 2.0 Cocoa and Coffee Needs Assessment ...............................................................................................6 2.1 Organization of the cocoa and coffee sectors ....................................................................................6 2.2 The market economy for cocoa and coffee .......................................................................................9 2.2.1 Current conditions and marketing arrangements...............................................................................9 2.2.2 Elements making up cocoa and coffee prices..................................................................................11 2.2.3 World market situation for cocoa, October 1999 ............................................................................11 2.2.4 World market situation for coffee, October 1999............................................................................12 2.3 The position of cocoa and coffee in the agricultural sector.............................................................13 2.3.1 The agricultural sector.....................................................................................................................13 2.3.2 Positions of cocoa and coffee in agriculture....................................................................................13 2.3.3 Socio-economic context ..................................................................................................................14 2.4 Condition of cocoa and coffee plantations ......................................................................................14 2.4.1 Coffee plantings ..............................................................................................................................15 2.4.2 Cocoa plantings ...............................................................................................................................15 2.4.3 The large plantations .......................................................................................................................15 2.4.4 Cocoa estates ...................................................................................................................................17 2.5 Stakeholders in cocoa and coffee subsector ....................................................................................17 2.5.1 Producers’ views on factors influencing industry ...........................................................................19 2.5.2 Buying agents..................................................................................................................................23 2.5.3 Farmer organizations.......................................................................................................................23 2.5.4 The Cocoa and Coffee Industry Board (CCIB) ...............................................................................24 2.5.5 Market for coffee.............................................................................................................................27 2.5.6 Market for cocoa .............................................................................................................................28 2.6 Cocoa and coffee government support structures............................................................................29 2.6.1 Research ..........................................................................................................................................29 2.6.2 Extension services ...........................................................................................................................31 2.6.3 Public rehabilitation policy .............................................................................................................31 2.6.4 Experience with the experimental fermentation unit.......................................................................33 2.6.5 Overall conclusions regarding experience with government intervention and challenges for future policy...............................................................................................................................34 3.0 Recommendations ...........................................................................................................................37 3.1 Remove coffee from CCIB and liberalize its trade .........................................................................37 3.2 Open up the cocoa export market to the private sector ...................................................................39 3.3 Modify the cocoa quality buying system.........................................................................................40 3.4 Liberalize the cocoa sector ..............................................................................................................43 3.5 Develop a policy to encourage the development of farmer associations.........................................43 3.6 Step up extension work ...................................................................................................................44 3.7 Step up research for agricultural development ................................................................................45 3.8 Timing of implementation...............................................................................................................47 3.9 Incorporate cocoa and coffee into a rural development strategy .....................................................47 3.10 Conduct production surveys............................................................................................................48 3.11 Conduct survey of cocoa buying agents, brokers, and manufacturers.............................................49 4.0 Conclusion.......................................................................................................................................49 Appendix I .....................................................................................................................................................51 Appendix II....................................................................................................................................................54
  6. 6. Cocoa and Coffee Industry Board Needs Assessment 1.0 Introduction Cocoa and Robusta coffee have been grown in Trinidad for over two centuries and figured for a long time among the main cash crops, providing the country with much of its export earnings. The first official cocoa exports date back to 1796, with 96,000 pounds (43,545 kg) shipped. The first coffee production dates back to the same period, but coffee was often planted as a secondary crop around the edge of cocoa plots. Initially, both crops were planted in large, colonial-type plantations and then spread to small- and medium-sized farms. This production structure led to a distinction being made between plantation quality cocoa and estate quality cocoa from family-run farms. Although Trinidad is best known for its cocoa, coffee production has been not insubstantial. 1.1 Brief history of cocoa cultivation in Trinidad. The Spanish, with the corresponding development of large plantations, introduced the Criollo cocoa variety (Venezuelan origin) in 1525. In 1727, natural disaster and disease resulted in the sudden destruction of cocoa plantings. Subsequently, in 1856, the Forastero variety was introduced from Venezuela. Wild hybridization between Forasteros and the remaining Criollos varieties gave rise to the Trinitario variety. By the end of the 19th century, there was an increase in the area planted and particularly in the replacement of sugar cane with cocoa in the large French and Spanish plantations. In 1920, the Government of Trinidad intervened by setting up a loan system for small cocoa farmers. This program, along with favorable growing conditions for the Trinitario variety, helped to make Trinidad become the world’s fifth largest producer. However, in 1928, witches’
  7. 7. 2 broom disease, caused by Crinipellis perniciosa, appeared in Trinidad, causing a substantial rise in production costs. In 1935, the first selections of Imperial College Selection (ICS) clones were developed and distributed to growers by the Imperial College of Tropical Agriculture. In 1939, oil production began, and coupled with low returns for cocoa, resulted in an increasing lack of interest in cocoa, which was exacerbated by World War II. As a result, the cultivated area decreased by 50 per cent and production fell by 75 percent. In 1945, the Cocoa and Coffee Industry Board (CCIB) implemented the first cocoa rehabilitation program. From 1959 to 1960, there was an increase in the area planted and in production, along with the creation of propagation units for selected hybrids distributed initially in cutting form (clones), then also in seedling form. Genetic improvement (resistance to black pod rot and witches’ broom) continued, and TSH (Trinidad Selected Hybrids) or TSA (Trinidad Selected Amazons) lines, derived from crosses between Trinitario and Upper Amazon materials, were created for resistance to black pod rot and witches’ broom. Almost eight million plants were distributed, covering 10,000 ha. These actions, however, did not stem the decline in cocoa production that began in about 1960 and continued through the late 1980s (Figure 1). A new cocoa rehabilitation program initiated in 1987 has facilitated recent stabilization of production at a relatively low level. 1.2 Current production situation. At the beginning of the 1920s, Trinidad was the world’s fifth largest cocoa producer with almost 35,000 tons (75,238,000 pounds in 1921), but Trinidad only exported between 1,500 and 2,000 tons of cocoa per year over the last decade. For coffee, the situation is even more drastic, since Trinidad switched from being an exporter to an importer.
  8. 8. 3 Figure 1. Cocoa Production in Trinidad Since 1796 40000 Cocoa production (in tons) in Trinidad 35000 30000 25000 20000 15000 10000 5000 0 1796 1804 1812 1820 1828 1836 1844 1852 1860 1868 1876 1884 1892 1900 1908 1916 1924 1932 1940 1948 1956 1964 1972 1980 1988 1996 Production is no longer adequate to supply the local roasting and instant coffee industries. Table 1 and Figure 2 indicate cocoa and coffee production trends over the past 30 years and extrapolate trends to the next fifteen years if no steps are taken rapidly to stem the decline of these two crops. Between 1921 and 1999, productivity/ha decreased 75 percent (430 kg/ha in 1921 as opposed to 120 kg/ha in 1999). If past trends continue, Trinidad will cease to be a cocoa exporting country within the next 15 years, as has happened in coffee, despite the good reputation of cocoa from Trinidad. The few tons currently going into the niche markets will not be enough for Trinidad to maintain recognition in the international market. Official statistics indicate that Trinidad has around 16,000 ha of bearing cocoa and coffee trees that are mostly intercropped. In reality, the area in production is undoubtedly less with 8,000-10,000 ha being harvested by 4,800-5,000 growers, according to data gathered by the Cocoa and Coffee Industry Board (CCIB). Average yields are extremely low, ranging from 100-
  9. 9. 4 Table 1. Production Data for the Last 30 Years (in Metric Tons) Production Production Production Years Cocoa Coffee Years Cocoa Coffee Years Cocoa Coffee 1970/71 4 334,860 3 853,860 1980/81 2 777,304 2 676,901 1990/91 2 050,000 950,000 1971/72 4115.710 3 293,490 1981/82 2 531,937 1 900,000 1991/92 1 306,960 1 244,115 1972/73 4 815,100 2 745,500 1982/83 1 780,579 1 391,273 1992/93 2 122,085 1 010,277 1973/74 4095760 1 922,450 1983/84 1 743,030 871609 1993/94 1 514,420 1 086,925 1974/75 5180950 3 911,410 1984/85 1 555,910 2 141,641 1994/95 1 900,698 860,967 1975/76 2319870 2 557,880 1985/86 1 313,000 1 350,000 1995/96 1 985,719 355,797 1976/77 4309900 2 669,940 1986/87 1 655,239 1 842,278 1996/97 1 834,548 1 114.678 1977/78 3537610 2 372,770 1987/88 1 897,858 586240 1997/98 1 512,637 393,284 1978/79 2887360 2 364,680 1988/89 1 438,942 1 145,836 1998/99 1 115,807 343,019 1979/80 2091036 2 707,803 1989/90 2 077,046 1 985,817 1999/00* 1 500,000 1000 * Forecast. Source: Cocoa and Coffee Industry Board.
  10. 10. 5 Figure 2. Production Curves and Projected Trends 6 000 COCOA AND COFFEE PRODUCT ION metr i c tons of cocoa and cof f ee beans 5 000 Cocoa 4 000 3 000 2 000 Cof f ee 1 000 T r ends f or the next 1 5 year s - 1970/71 1973/74 1976/77 1979/80 1982/83 1985/86 1988/89 1991/92 1994/95 1997/98 250 kg/ha for cocoa and 100-150 kg/ha for coffee. Fewer than 10 of the large cocoa plantations achieve yields of more than 400-500 kg/ha. 1.3 Purpose. The purpose of this needs assessment was to evaluate the Cocoa and Coffee subsectors of Trinidad’s agricultural economy with a major emphasis on the role and operation of the Cocoa and Coffee Industry Board (CCIB). Specific tasks performed included: Develop a baseline set of data. Assess the entire supply chain including the input delivery system, the transport system, and the harvest and post harvest systems. Evaluate the role, function, operation, and performance of the Cocoa and Coffee Industry Board. Special attention was given to policy implications of the Board. Evaluate performance of the Board. Where deficiencies exist, indicate why, and propose remedies.
  11. 11. 6 Identify constraints at each link in the supply chain and recommend solutions to alleviate the constraints, rendering the entire chain more profitable. 1.4 Needs assessment process. The needs assessment for cocoa and coffee was led by Daniel Duris who is Head of the Tree Crops Department, Centre de Cooperation Internationale en Recherche Agronominque pour le Developpement (CIRAD), headquartered in Montpellier, France (Appendix I). CIRAD is internationally known for the expertise of its staff in both cocoa and coffee. Assessment of CCIB and the related industry was completed in the following sequence: 1. Previous assessments of the cocoa and coffee industry in Trinidad were reviewed. 2. A database on the industry was developed and analyzed. 3. CCIB was reviewed, and its role and performance were analyzed. 4. Producers of cocoa and coffee were interviewed. 5. CCIB was given an opportunity to review and comment on a draft of this report (Appendix II). 6. The final draft of this report considers comments received from CCIB. 2.0 Cocoa and Coffee Needs Assessment 2.1 Organization of the cocoa and coffee sectors. A general organization of the cocoa and coffee sectors is shown in Diagrams 1 and 2. For domestic marketing, the channels are extremely simple. Cocoa and coffee are delivered to the buying agent near the production zones. The buying agents then deliver to a private company, Produce Marketing Associates (PMA), which packages the product and handles its shipment.
  12. 12. 7
  13. 13. 8
  14. 14. 9 In 1945, Trinidad set up the Cocoa and Coffee Industry Board (CCIB), to implement the first cocoa rehabilitation plan (1945-1965), which guaranteed that all production would be purchased at a fixed price. CCIB, under the authority of the Ministry of Agriculture, Land, and Marine Resources (MALMR), is also responsible for marketing the produce on the international market. CCIB occupies a monopoly position for sales of coffee and a quasi-monopoly for cocoa. According to CCIB’s charter, cocoa growers producing more than 30,000 pounds of cocoa or coffee (13,608 tons) may obtain an export license from CCIB for their own produce. Reportedly, only three producers currently export their own cocoa. For privately exported cocoa, CCIB ensures quality control and issues certificates of quality and origin. Once CCIB has negotiated a contract on the international market, PMA handles the marketing. An inspector appointed by CCIB is responsible for checking the quality of the delivered product and arbitrates in the event of disputes between stakeholders: producers versus buyers and buyers versus PMA. Payment to producers, buying agents, and PMA is established by CCIB: Producers receive 12 TT$/kg for cocoa and 11 TT$/kg for coffee beans. The buying agents, approved by CCIB, receive a commission amounting to 0.45 TT$/kg of product collected. PMA receives a commission of 0.83 TT$/kg for product packaging plus a two percent fee as loader, calculated from the FOB value of the product. 2.2 Market economy for cocoa and coffee. 2.2.1 Current conditions and marketing arrangements. For the 1999-2000 season, the farm- gate price for cocoa was raised from 9.55 to12 TT$/kg, and that for coffee from 8.36 to
  15. 15. 10 11 TT$/kg. The previous prices had been fixed 15 years ago. The producer pays for produce transportation from farm to buying agent; the buying agent pays for produce transportation from buying agent to PMA. The bags (10 TT$/50-kg bag) required for primary collection and delivery to PMA are purchased by the buying agents, or possibly by producers when they deliver directly to PMA. Curiously, producers do not receive the 0.45 TT$/kg collection commission when they deliver directly. On delivery, producers receive 8 TT$/kg for cocoa and 7 TT$/kg for coffee. A few days or weeks before Christmas, they receive an additional 4 TT$/kg. Buying agents pay for their purchases from their own funds, without financing from the banking system, as short-term interest rates greater than 10 percent are too high to be covered by the 0.45 TT$/kg collection commission. On delivery to PMA, the buying agents are paid immediately. Cocoa is sold entirely on the international market by CCIB. It is bought according to quality. There are two quality grades corresponding to very precise classification criteria: Grade 1, or plantation cocoa receives a price of 12 TT$/kg (TT$ 8 + TT$ 4) with 90 beans or less/100 g, a moisture content of under 11 percent, and no defective beans. Grade 2, or estate cocoa receives a price of 8.40 TT$/kg (TT$ 4.40 + TT$ 4) for cocoa with a maximum of 110 beans per 100 g, a moisture content of under 11 percent, and a maximum of six percent defective beans. If these criteria are not satisfied, producers have to redry their cocoa and sort it. A systematic two percent weight deduction is applied to transactions between producers and buying agents or between producers and PMA to compensate for any losses, irrespective of grade. Coffee is entirely sold to local industries. Coffee growers usually deliver unhulled, dry coffee (cherries). The cherries are hulled by the buying agents or PMA at a cost fixed by CCIB
  16. 16. 11 of 0.24 TT$/kg of green coffee. Producers are remunerated according to the green coffee weight obtained after hulling. They receive 11 TT$/kg of green coffee (TT$ 7 + TT$ 4). 2.2.2 Elements making up cocoa and coffee prices. Producers of cocoa and coffee both face the following marketing cost structure in TT$/kg. CCIB operating costs $0.45 PMA packaging costs $0.83 PMA commission as loader $0.23 (2 percent of average FOB value) Total $1.51 For the 15 seasons prior to 1999-2000, the end price for cocoa was 11.51 TT$/kg. According to CCIB, the average value of international transactions was based on contracts exceeding US$ 2,000 per ton (12.40 TT$ /kg), leaving a minimum margin of 0.89 TT$/kg. Given its organoleptic qualities, Trinidad cocoa is sold for more than bulk cocoa.1 For coffee, the price rise following the 1994 crisis enabled CCIB to make a profit. International Coffee Organization (ICO) prices, which are indicative of the world market price from 1994 to 1998, respectively, were US$ 2,716, US$ 2,777, US$ 1,807, US$ 1,695, and US$ 1,820 per ton. These prices are an equivalent of 10.51-17.22 TT$/kg, depending on the season. 2.2.3 World market situation for cocoa, October 1999. The cocoa market is depressed; though according to some analysts, the beginning of the harvest season always shows a downward trend. The indicative price2 of the International Cocoa Organization (ICCO) for the first week in October (1999) was US$ 1,126.35/ton (6.99 TT$/kg) for bulk cocoa. World bean 1 Trinidad cocoa is renowned for its organoleptic qualities. This point will be covered later. Hence, as demand is strong from the fine chocolate industry, this use still benefits from high prices compared to bulk cocoa. 2 The ICO and ICCO indicative prices are average prices calculated from all the day’s transactions. They provide a good idea of trends.
  17. 17. 12 production in 1998-99 was estimated to be 2,759,000 tons with a 41,000-ton increase for West Africa and Indonesia. This increase more than compensates for the decreases in Brazil and the Dominican Republic. Initial indications for the 1999-2000 season suggested world production at least as good as 1998-99. Grindings could decrease by about one percent. Grindings have a strong influence on the fixing of world prices, much more so than the amount of cocoa physically available. The experts note a production deficit of 50,000 tons for the 1998-99 season but expect a return to a surplus situation in 1999-2000. The cocoa market lacks transparency, because producing countries that carry out grinding provide insufficient information. The recent decision by the European Union to allow the addition of fats other than cocoa butter in chocolate is not likely to bolster world prices. Lastly, the Cocoa Producers’ Alliance, which has 11 members, supplies 72 percent of the world’s cocoa and therefore influences prices considerably. Apart from Gabon, which would appear to produce only 1,300 tons, all the others offer volumes 500 to 600 times larger than those of Trinidad. Despite a relatively privileged position on the world market, Trinidad cocoa has to cope with an unfavorable economic climate from the perspectives of both size and production costs. 2.2.4 World market situation for coffee, October 1999. Coffee prices have been steadily falling for the past three years, following the sudden surge in July 1994. Analysts are forecasting that this downward trend could continue for another year or two; then prices should stabilize around US$ 1.65/kg (10.25 TT$/kg). CCIB could theoretically find itself in a price support position. Coffee is made more complicated by the existence of two different products, Arabia and Robusta--the latter being used for preparing Arabia-based blends and instant coffee production. The price of Robusta coffee is lower than the Arabia price but follows the same
  18. 18. 13 general trends as the Arabia price. However, over the last 25 years, major coffee price fluctuations have occurred, and in the event of climate problems (frosts in Brazil, El Niño), Robusta prices can be very high and virtually the same as prices for Arabia. 2.3 Position of cocoa and coffee in the agricultural sector. 2.3.1 The agricultural sector. Since the oil boom in the 1960s, the agricultural sector as a whole has been depressed. Many farms have been abandoned; some of them are now isolated from lines of communication and transportation. The proportion of aging farmers is on the increase. Income from cocoa in the 1950s and 1960s enabled the schooling of many young people, giving them access to the University. The young left the land to try their luck in urban areas, where they hoped to find more pleasant living conditions (higher wages, leisure activities, less arduous work, few or no risks). Some emigrated and many obtained salaried employment. Outside the urban zones, where market garden crops predominate, most agricultural production involves sugar cane, banana and plantain, citrus fruits for fruit juices, pineapple, and papaya. Earnings from these crops are often much higher than earnings derived from cocoa and coffee and offer the advantage of bringing in weekly or monthly income. Forestry is also beginning to attract numerous farmers who plant mahogany and cedar, despite the 15-20 years it takes before harvest. For these producers, forestry requires very little work, little or no inputs, and constitutes worthwhile capital that is not depreciated for their heirs. 2.3.2 Position of cocoa and coffee in agriculture. Cocoa and coffee play only a secondary role on most farms. In many cases cocoa and coffee have been abandoned for more profitable crops. According to farmers, production costs are at least the same as the prices paid to the producer, and are often much higher. That can easily be explained by the fact that growers, in addition to
  19. 19. 14 low output per hectare, primarily use hired labor, partly because the farmers are old and partly because their children have left the farm. 2.3.3 Socio-economic context. The poverty line3 is estimated at TT$ 623 per capita per month. While poverty affects urban areas due to unemployment, the rural world is not spared, and many farmers figure among the new poor or are gradually moving into that category. For a family of four, (2 adults and 2 children) the poverty level would be TT$ 22,164 per year, the value of 1,885 kg of cocoa. With average yields of 150-170 kg/ha, that means between 11 and 13 hectares of cocoa, excluding inputs. This yield corresponds to the current extensive crop management practice, with 35-40 working days per hectare per year, including harvesting. Therefore, it is virtually impossible for a family to survive on cocoa production, as it will also have to devote work to food crops. For these families, it is also impossible to invest the essential minimum for fertilizer and chemicals to improve the productivity of their cocoa trees. Several producers mentioned the low educational levels of those remaining on the land. According to them, this situation is tending to increase, meaning that those excluded from economic development following the oil boom have no alternative but to return to the land. This attitude seriously discredits farm work and has been one of the factors leading to reduced cocoa production. 2.4 Condition of cocoa and coffee plantations. Cocoa and coffee plantations are both largely in a depressed economic state. Given that most of the plantations visited involved cocoa, more emphasis will be placed on that crop. Moreover, Trinidad has a degree of pride in its cocoa and has placed greater emphasis on that crop. Nevertheless, the coffee situation is very similar to that of cocoa cultivation. 3 Linda Hewitt, The determination and measurement of poverty in Trinidad and Tobago, September 1996.
  20. 20. 15 2.4.1 Coffee plantings. Virtually all the coffee produced comes from plantings mixed with cocoa and other species. The only monoculture visited was in the southern region. That farmer felt that coffee was more economical to produce than cocoa since no inputs need to be purchased. The coffee trees, which are spaced wide apart (9 x 9 and frequently 12 x 12 feet) like the cocoa trees, are propagated from seeds harvested from the most productive trees. The plantings are all under natural shade. With weeds being limited by natural shade, there is minimal upkeep required. No sucker removal or cutting back is carried out. The plantings receive no inputs. The coffee trees are usually vigorous and do not appear to suffer from mineral deficiencies. Nevertheless, it would not be surprising in more intensive farming systems to see the occurrence of iron deficiencies through a blockage of that nutrient by excess lime in the soil. Average yields are around 100 kg/ha. As in cocoa, coffee growers use hired labor for upkeep and harvesting. The daily harvesting task involves gathering an average of 25 kg at a cost of 4 TT$/kg (at a daily wage rate of TT$ 100). With green coffee bringing 7-8 TT$/kg, it is easy to understand why coffee is not judged to be profitable. 2.4.2 Cocoa plantings. Two major types of cocoa cultivation are found: Plantation cocoa, cultivated on large domains, where cocoa is grown more or less as a single crop. Small, family-run farms or estates on which the share of cocoa is tending to fall substantially, and the cocoa trees are intercropped with numerous plant species (banana, citrus, forestry, etc.). 2.4.3 Large plantations. About 300 plantations, including those belonging to MALMR, produce more than 1,000 kg of cocoa per year. These large plantations are not necessarily
  21. 21. 16 efficient, and some have yields/ha equivalent to those of small holders. Only a few of these large plantations are efficient. Two exceptions where cocoa is the main activity were encountered: The Grand Couva plantation (privately owned) is in the center of the island, which is located on the best cocoa soils in the country. This plantation, which is primarily planted with Trinitario material, produces between 400-600 kg/ha depending on the year. The trees, which average over 40 years old, are grown under artificial shade. They are regularly pruned for maximum ventilation to minimize the incidence of black pod. Major care consists of three to four applications of copper hydroxide per year to protect against black pod, mosses, and epiphytes that develop on trunks and branches. The cocoa trees, which were propagated by cuttings from a major collection planted more than 50 years ago by the ancestors of the current owner, are spaced very wide apart (12 x 12 feet or 3.94 x 3.94 m). The average planting density is 400-500 cocoa trees per hectare. Materials from this collection are used by researchers at the Cocoa Research Unit (CRU), a department of the University of the West Indies (UWI). There are still other plantations of this type, but smaller, around the Grand Couva plantation. The plantation plans to produce cuttings for its own use and possibly for the neighbors. The Trinitarios will be propagated. The second plantation, near Sangre Grande in the East, is less than 10 years old and consists primarily of TSH4 material planted with very little forest cover at a density of 2,580 trees/ha (6 x 6 feet or 1.97 x 1.97 m)--i.e., four times higher than that of 4 Trinidad Selected Hybrids: selection carried out for resistance to black pod rot and witches’ broom.
  22. 22. 17 traditional plantations. According to the owner, production amounts to 1,200-1,300 kg/ha. The planted material consists of cuttings planted along the boundaries and seedlings. The soils, which are much less fertile than those in the center of Trinidad, require substantial applications of mineral fertilizers. Also, according to the owner, black pod rot does not appear to be a limiting factor, though preventive copper applications are carried out regularly. However, most of the care given involves very severe pruning of the trees and drain upkeep, as the soil has a high clay content, and the land is flat. Weed cover is kept to a minimum (leaf litter and self-shading). 2.4.4 Cocoa estates. Around 4,800 estates produce 1,000 kg of cocoa per year on average (source: CCIB, 1997). As a general rule, the cocoa trees receive little upkeep, including the largest ones; there are no post-harvest treatments, and damaged pods remain on the trees. A large majority of growers have installed additional shading to varying degrees with chayote (Sechium edule), which provides weekly income. Missing trees are replaced by other plant species, e.g., breadfruit (Artocarpus altilis) and citrus. Most of the estate material was planted about 30 years ago and is made up of TSH cuttings and seedlings at a density of 640 plants/ha. Their genetic potential, estimated at two tons/ha by research, is under-exploited. Many farmers are highly skeptical about the merits of planting at higher densities and fear rapid exhaustion of the plantation. The estates visited primarily belong to farmers who also have other activities. In all cases, cocoa is only the second or third source of income. 2.5 Stakeholders in the cocoa and coffee subsector. This section analyzes the status of the various stakeholders in the cocoa and coffee industry of Trinidad and Tobago. It is based on the survey work of Abdul-Karimu, which is complemented by interviews with stakeholders
  23. 23. 18 representing segments in the Trinidad and Tobago cocoa and coffee subsector. The results of these interviews and the survey results are then combined with the extensive knowledge base of the consultant responsible for this report. Among the most recent work on cocoa in Trinidad, the survey by Abdul-Karimu5 undoubtedly gives the most complete recent picture. The following three tables (Tables 2-4) summarize the results of his survey in terms of some of the key demographic and cultural characteristics of the industry. Table 2 indicates the number of cocoa farmers and the sample size utilized by Abdul- Karimu. The sample is certainly too small for statistical validity, but the data gathered are undoubtedly the most precise that exist today. Table 3 provides a summary indication of estate size, yield, and age of trees. Most of the trees are mature and old, indicating a substantial need for rehabilitation. This study was not able to determine why the east region has the best yields. Table 2. Number of Cocoa Farmers and Farmers Sampled In Survey Regions Number of Farmers Interviewed Farmers Percent Central 2800 78 2.8 East 1700 47 2.8 South 910 25 2.8 Total 5410 100 ---- Source: Farmers’ Perspective of Cocoa Planting Material in Trinidad and Factors Affecting Output From Cocoa Estates, Cocoa Research Unit, University of West Indies, St. Augustine, Trinidad, February 1999. 5 There is a file at CCIB in which producers who sell their own cocoa and coffee are registered. The site of the farm, the property's title, the total area of the farm, and the area planted to cocoa and coffee is indicated. The consultants of a feasibility study for the revival of the cocoa sector used part of the file. However, the data gathered are incomplete and inaccurate.
  24. 24. 19 The south region, which is economically the poorest and the most distant from the urban centers, seems to be continuing to develop its cocoa cultivation. It is also the region that has the highest rate of families living below the poverty line. Cocoa offers the possibility of generating some cash receipts with fewer constraints than fresh produce. Table 4 summarizes the cultural practices found to exist in the Karimu study. The three cultural practices applied by producers are weeding, pruning, and moss control. However, the lack of any treatment against black pod rot renders moss control pointless. 2.5.1 Producers’ views on factors influencing industry. The main factors affecting the cocoa industry, as reflected in producer/farmer opinions as determined from the survey by Dr. Karimu, are indicated in Table 5. The costs of inputs and labor and cocoa prices are the main concerns of farmers, though curiously cocoa prices come in third position. 2.5.1.1 Cost of inputs. Cocoa input costs are high when they are bought at retail or in small quantities, but the chemical companies are ready to offer a 30-50 percent discount for large purchases. For instance, Kocide, a copper-based fungicide sold at retail for 75 TT$/kg can be obtained for about 32 TT$/kg by commercial operators. Inappropriate choices in the use of pesticides were noted during the visits with producers. For example, on one plantation with moderate upkeep, the producer purchased herbicides for weeding but did not purchase fungicides to protect his harvest or to keep floral cushions free of moss. The plantation had very low yields, not because of weeds but solely because of the abundance of moss on floral cushions, which prevented flowering. In addition, the existence of numerous rotten or mummified pods clearly showed that no fungicides were used.
  25. 25. 20 Table 3. Estate Size (ha) and Yield (kg/ha) - Age of Trees (Years) as a Percent of Number of Estates Regions Estate Size and Yield Age of Trees Young Mature Old Mean Size (ha) Range Mean Yield <7 7-25 >25 Y&M Y&O M&O Y&M&O Central 5.2 1.6-16.2 178 3.9 6.4 23.4 5.12 6.4 55.3 8.5 East 6.1 1.0-30.4 370 14.1 17.9 28.2 20.5 10.3 South 5.3 0.8-16.2 170 20 20 4 28 8 Table 4. Cultural practices and post-harvest processing (%) Regions CULTURAL PRACTICES POST-HARVEST PROCESSING Fungus Insect Moss Weed control Pruning control control Fertile. control Fermentation Drying Manual Chemical Sweat box Heap Others Machine Sun Central 97.9 2.1 100 0 4.3 14.9 95.7 42.5 55.3 2.1 0 100 East 100 0 94.5 7.7 16.7 16.7 62.8 46.1 53.9 2.6 0 100 Table 5. Factors Affecting the Cocoa Industry as Reflected in Farmer Opinions Percent of interviewed farmers Factors Central Region East Region South Region Very Serious Serious Not Serious Very Serious Serious Not Serious Very Serious Serious Not Serious Cocoa input costs 100.0 --- --- 87.2 10.2 2.6 88.0 8.0 4.0 Labor costs 91.5 4.2 4.3 79.5 6.4 14.1 92.0 8.0 --- Cocoa prices 81.5 8.5 --- 87.2 10.2 2.6 80.0 16.0 4.0 Road access 76.7 2.1 21.3 73.1 1.3 25.6 44.0 16.0 40.0 Extension services 78.7 8.5 12.8 73.1 10.3 20.5 36.0 8.0 56.0 Planting material 27.6 53.2 19.2 28.2 42.3 29.5 36.0 32.0 32.0 Weather 12.8 29.8 57.4 34.6 23.1 42.3 12.0 36.0 52.0 Labor availability --- 10.6 89.4 23.1 19.2 57.9 16.0 40.0 44.0 Source: Farmers’ Perception of Cocoa Planting Material in Trinidad and Factors Affecting Output from Cocoa Estates, Cocoa Research Institute, University of the West Indies, St. Augustine, Trinidad, February 1999.
  26. 26. 21 2.5.1.2 Labor costs. The minimum wage in Trinidad and Tobago is 57 TT$/day. In the central region, where there is competition with sugar cane, laborers are paid up to 100 TT$/day. Essentially all producers employ hired labor for at least 60-80 percent of the work time required for a plantation. It takes at least 30-35 days’ work for plantation upkeep and 5-10 days for harvesting and treatment under the conditions in Trinidad, for yields of 150-200 kg/ha. Hired labor, therefore, accounts for at least 135-175kg of cocoa. Because of high labor costs, for yields under 150 kg per hectare, producers probably settle for simply harvesting themselves or abandon the plantation altogether. In other words, self-harvesting is the final stage before abandonment. Under these conditions, it is understandable why it is impossible to purchase inputs. During the plantation visits, a large number of mummified pods were seen on trees, some because they were rotten; animals had attacked others. There were also healthy pods that had not been harvested because the farmer considered that yields were too low to be worth harvesting. Full harvesting, including mummified and rotten pods, minimizes black pod attacks. Although labor costs are a real problem, labor availability is satisfactory according to the survey. Nevertheless, farmers feel that the Unemployed Relief Program, introduced by the Government, discourages the unemployed from seeking work. 2.5.1.3 Productivity of the cocoa plantings. Although it was not mentioned in the survey, producers often mention the low productivity of cocoa plantings. This is attributed to the age of the plantings. Farmers ignore, or are unaware of, the fact that a lack of care directly causes low yields. The overall condition of cocoa plantings, missing trees, over-dense shade, moss on trunks and branches, etc. results from a lack of upkeep. Age has nothing to do with these problems. This lack of producer knowledge may be the result of inadequate Extension education programs.
  27. 27. 22 2.5.1.4 Production costs. With low yields, production costs were found to be in a range of 7-11 TT$/kg. Costs in this range are the same as those obtained when calculated from operating budgets. In fact, higher production costs were found when an attempt was made to maximize yields by only using hired labor. On the other hand, by using family labor only, production costs could be reduced to between four and seven TT$/kg, depending on the degree of intensification. Lastly, the best profit is not obtained with the highest yields, which require heavy investment in inputs. That is, fertilizer costs increase as application rates rise, and fungicides are very effective but also very expensive. A plantation of one or two hectares with yields of 400-600 kg/ha, run exclusively with family labor, can attain a net income of TT$ 5,600-9,600 annually, which is not enough to provide a living for the family, but neither does it require all of the available family labor. Other crops are also required to keep cocoa on a family farm. But cocoa needs to be used as a diversification crop in order to minimize agricultural risks. Analysis of operating budgets shows that cocoa and coffee are profitable while the plantation is still in the production phase, but investment for new plantings will be difficult to recoup. Efforts, therefore, should be made initially to rehabilitate existing plantings. 2.5.1.5 Access roads. After cost and price problems, farmers complain about the poor condition of access roads to the estates. Some plantations have become totally cut off and abandoned, as their produce can no longer be transported to market. In view of the major investment required to rehabilitate roads, choices have to be made. For the cocoa and coffee sub-sectors alone, roads have not been seen as a priority for assisting rehabilitation. However, agriculture as a whole is absolutely dependent on an adequate road system if it is to be profitable. Put more directly, if agriculture is to be profitable, Trinidad and Tobago’s rural road system must be improved.
  28. 28. 23 2.5.1.6 Extension service. Although MALMR has an Extension Service, farmers widely complain that they very rarely or never see Extension officers. In fact, farmers do not need the current basic advice that Extension provides, since farmers have sufficient technical knowledge to maintain a plantation (installation of shading, crop protection, pruning, fertilization, etc.). Some farmers reported that Extension officers teach how to dig a hole when planting, or “recommend that we weed our plantations.” Producers expect more than strictly simple technical advice. Farmers are not sure that they want to be visited by the current Extension officers. During discussions with farmers, it was noted that if a technical innovation is proposed, the reaction of farmers is to refuse it. However, they are prepared to try it out once its economic feasibility is demonstrated. And a universal method of Extension teaching is field demonstrations! 2.5.2 Buying agents. An expanded role for middlemen between isolated producers and PMA is essential for current conditions in Trinidad. Most of these producers are cocoa and coffee producers who are also involved in other commercial activities. Some have grouped together in cooperatives to counter PMA’s monopoly, and at least one of these cooperatives intends to export cocoa. It is obvious that buying agents can play a major role in farmer organizations, but producer organizations without buyers as members should also be able to market their cocoa and coffee production directly on the domestic market. 2.5.3 Farmer organizations. Officially, a Cocoa Producers’ Association (CPA) representative sits on the CCIB Board. The association virtually disappeared with the drop in production at the beginning of the 1960s, and no true association existed for almost 30 years. Recently, a few new CPAs have been emerging including: Montserrat Farmers’ Association (Caroni County).
  29. 29. 24 Cocoa Growers’ Association (Rio Claro, Nariva County). Cocoa and Coffee Marketing Cooperative Society Ltd. (Victoria County). These CPAs were set up on the initiative of buying agents who are also producers. It is important that an association movement is taking shape, but it is regrettable that no organization composed strictly of producers has yet to emerge. This not only bears witness to the interest in cocoa shown by some stakeholders in the sector but also reveals concerns about the future of cocoa production. Spontaneous association movements tend to spring up when there is a crisis, as is the experience in most countries. 2.5.4 The Cocoa and Coffee Industry Board (CCIB). CCIB is virtually the only exporter of cocoa from Trinidad, the share of the few private exporters being less than five percent of national production. CCIB also has a total monopoly for coffee trade on the domestic market. Coffee exports ceased four years ago (ICO statistics). The quantities currently produced are inadequate for supplying the domestic market. Apart from the guarantee of fixed prices, CCIB only has a commercial role, since neither extension nor research is under its direct control. Boards were set up to protect producers from price fluctuations in the international markets and from speculation. Only crops such as cocoa and coffee, usually grown by isolated small farmers, have been integrated into the Boards. International crops such as rubber or oil palm are managed by large multinational companies, which control the entire commodity chain. UNILEVER and FIRESTONE are typical examples of such multinational agribusiness supply chain management systems.
  30. 30. 25 Over the years, the Boards have become extremely important political instruments. Three models predominate the international scene, including: Some boards, such as the Kenyan Coffee Board (KCB), have integrated parts of the subsector by including research, extension, domestic marketing, and export functions of the supply chain. However attractive such an approach might be, producers remain totally dependent on the policies of the Board. Other countries, such as Indonesia, have totally liberalized their sectors, with the consequence of a relatively inefficient research mechanism and ineffective Extension services. Some countries, such as Colombia with its Federación Nacional de Cafeteros (FNC), have opted for multiple producer associations that are federated at the national level. FNC then subsidizes research and extension. Domestic and export trading are in the hands of the private sector (including private firms and producer associations). In addition, FNC acts as a partial price stabilization organization, but prices are not fixed. FNC is an interprofessional structure, and its members include all stakeholders in the sector, including producer credit organizations. General coffee policy is defined within FNC. The drawback of this system is that it does not totally take into account social demand for diversified cropping systems. 2.5.4.1 Producer complaints about CCIB. Apart from price levels, producers make several complaints about CCIB practices, including: Buying based on quality. Quality based buying is justified on the basis of fermentation, performance in drying, and on the absence of defective beans. However, for fermentation to be as good as possible, it is essential to have a
  31. 31. 26 minimum volume of fresh beans of around 100 kg. However, taking the number of dry beans/100 kg as a quality measure does not make sense for the following reasons and pointlessly penalizes producers: Bean size depends on climatic conditions and the varieties cultivated, two factors over which the producer has little influence. Bean size affects the butter content, and that criterion is only valid for cocoas intended for the butter extraction industry and not for chocolate making. Moreover, the reputation of Trinidad cocoa is due to a special flavor, and the flavor compounds are found in the cocoa powder, not in butter. The industry and, particularly, chocolate manufacturers prefer to roast batches of uniform bean size for a uniform product. Cocoa grading, like coffee grading, is part of the packaging operations, which are usually carried out by exporters who also do the bean polishing. Discount for losses. The two-percent discount is supposedly to compensate for any losses linked to insufficient cocoa drying by the grower. But it is also a collective penalizing measure applied on an individual level and is, therefore, counterproductive. It is clear that producers who dry their cocoa to 11 percent moisture content will soon learn that it is in their interest to deliver cocoa with 13 or 14 percent moisture. The systematic deduction of two percent sets cocoa at an effective price of 11.76 TT$/kg for Grade 1 and 8.232 TT$/kg for Grade 2. The deduction could possibly be acceptable for grouped sales by producer associations, in which case it means applying group discipline, though it would be preferable to have
  32. 32. 27 an objective means of checking moisture content (which can be done using a moisture meter). According to producers and inspectors, disputes between producers and PMA are very frequent and acrimonious. This is particularly the case when producers deliver directly to PMA. There is an obligation to producers who deliver directly to PMA to buy bags at a rate of 10 TT$/bag. This problem was not mentioned when producers sell to buying agents, but the latter are required to procure them. Producers pay for transportation of cocoa and coffee products from the farm to the buying agents or PMA. There is no collection or procurement allowance for producers, whereas for other agricultural produce such as banana, citrus, and pineapple, the traders come to the farms. 2.5.4.2 Buying agents’ complaints. Buying agents’ complaints are more about PMA, which has a domestic marketing monopoly, rather than about CCIB. Buying agents complain about the autocratic manner of PMA relations. It is largely for that reason that they form producer associations. 2.5.5 Market for coffee. The coffee collected by PMA on behalf of CCIB is sold to the local roasting and instant coffee industries at a price of 12.68 TT$/kg (5.75 TT$/lb), the world price at the time of the consultancy interviews. Local roasted and ground coffee consumption is around 500 tons per year while Trinidad production is 300-400 tons. The instant coffee unit (Nestlé) can produce 6,000 tons of instant coffee (12,000 tons of green coffee). Nestlé currently operates at one-third of its capacity. Nestlé also has a decaffeination unit that is standing idle. To make up the difference between local production and consumption, the local industry imports coffee from Brazil and Mexico, providing work for over 100 people.
  33. 33. 28 As shall be seen, it is technically easier to produce coffee. For average yields of 500-800 kg/ha, this crop primarily requires labor and virtually no other inputs except fertilizer. 2.5.6 Market for cocoa. The chief asset of Trinidad cocoa is its organoleptic quality, which gives it access to highly specific markets, namely fine chocolate and luxury products. Trinidad cocoa, which is traded on the world market through brokers, still benefits from prices slightly above those of bulk cocoa, which enables CCIB to not be in a support position. This situation is very likely to disappear in the coming seasons with the expected drop in prices. There are three manufacturer markets for chocolate that are of concern to Trinidad:6 Large manufacturer market. The large candy manufacturers (Kraft Jacob Suchard, Mars, Cadbury, Nestlé, Hershey, etc.) become very demanding in terms of the quality of other sources. Their strategy is to offer consumers a product of consistent quality with an identical taste over time. To do that, these groups blend different sources. If one source is missing, it is replaced by another, and the composition of the blend, whose base might be a Ghana or Ivory Coast type cocoa, is modified to recover the taste of the brand. Medium manufacturer market. A large number of medium-sized fine chocolate manufacturers exist, although they have less flexibility than the large group. They obtain their supplies either directly from producing countries or from brokers. These manufacturers are set on supplying products of guaranteed origin but with as little variation in taste as possible for dark chocolates. Luxury manufacturer market. There exists a luxury manufacturer market, which specifically seeks a source to promote its product but cares less about having a 6 There is an additional flavored market, but the source of its chocolate is not important.
  34. 34. 29 chocolate of identical taste over time than about offering vintages to its consumers. In other words, like fine wine, there are expected to be annual variations in organoleptic quality. This industry is very demanding on cocoa quality: no defective beans, no molds, uniform bean size, etc. As a general rule, cocoa earmarked for this sector is bought directly from the plantation or from exporters where relations of confidence are established. The cocoa is always bought after sample analysis. Two ways of buying are generally common: 1) payment of a special premium, or 2) a fixed price supply contract covering periods of three to five years. The demand for this type of product is relatively small and concentrated in Europe. Nevertheless, in an increasingly affluent society, it is highly likely that demand will increase in the coming years, and the same will happen as has happened in the gourmet coffee market. This can provide a good opportunity for Trinidad cocoa if producers are in a position to take advantage of such niche opportunities. 2.6 Cocoa and coffee government support structures. 2.6.1 Research. There are two research structures involved in cocoa: The Research Division of MALMR has its main station at Centeno with sub-stations distributed throughout the country. The substations are intended to set up demonstration plots and produce planting material for growers. But a brief tour of the sub-station near Biche (East) and of the one near Sangre Grande revealed that cocoa activity was virtually nil. The Research Division staff for cocoa is limited to four people, three agronomists and an IPM specialist. This staff component does not cover all of the disciplinary requirements for effective cocoa research. The most pressing need is for a plant pathologist to deal with disease problems. There is a basic need to
  35. 35. 30 set up an applied research program for cocoa and coffee. As in the countries of Central America and Colombia, it would be helpful if some researchers could switch from research to Extension and vice versa. Such a system enables them to remain very pragmatic, essential for maintaining the applied research orientation. The Cocoa Research Unit (CRU) is a department of the Faculty of Agriculture and Natural Sciences (FANS) at the University of the West Indies (UWI). This structure performs research at the Centeno center and at UWI at St. Augustine. CRU undertakes research projects, some of which are implemented in partnership with the private sector. CRU has a very good reputation internationally, although this trust may reduce its usefulness to Trinidad as an applied research unit. No coffee research is currently carried out in Trinidad. CRU’s recurring budget is funded by the private sector (Biscuit, Cake, Chocolate, & Confectionary Alliance, UK; US$ 202,000) and by the Government of the Republic of Trinidad and Tobago (US$ 174,000) in addition to a cocoa researcher. Additionally, individual research projects are funded by various foreign public and private organizations. For example, the current projects being carried out by CRU researchers include: American Cocoa Research Institute (ACRI) project: witches’ broom control, at a level of US$ 51,000 annually. EU Chocolate, Biscuit, and Confectionery Association (CAOBISCO) project: black pod control, at a level of US$ 24,000 annually. Common Fund for Commodities (CFC) project: evaluation and characterization of germ plasm, at a level of US$ 35,200 annually.
  36. 36. 31 The research carried out under these projects is primarily basic research with no immediate impact on development. CRU has an international reputation but is of very little service to Trinidad and Tobago with respect to short-term results. 2.6.2 Extension services. Extension services are under the authority of MALMR and are theoretically responsible for training producers for all crops grown in Trinidad. The Extension officers are in charge of disseminating improved farm management practices developed by research. As noted previously, the producers contacted for this study did not find this to be the case. With the exception of the south region, they specifically complained about the lack of Extension services. Extension currently appears to be a nonfactor in cocoa and coffee production with the possible exception of the south region. 2.6.3 Public rehabilitation policy. The first intervention by the public authorities in 1945 was launched to revive cocoa production. It was implemented by CCIB and lasted until 1965, with a disappointing overall result. While production increased from 3,000 tons (1946) to almost 10,000 tons (1956), it then declined steadily. In 1965, Trinidad only exported 4,700 tons. Even the modest rise in production was linked to the introduction of new planting material. More than 16 million seedlings were distributed over that period. Production, however, continued to be carried out by traditional methods A series of policy proposals/recommendations have been made but have never been implemented including: In 1978, a second cocoa revival plan was proposed. The goal was to double production in 10 years by introducing a system of loans granted by the Agricultural Development Bank (ADB). A Steering Committee including CRU, UWI, and CCIB,
  37. 37. 32 research and Extension (MALMR) was proposed to monitor the operations. The first guaranteed prices were introduced in 1979. In 1991, a study proposed setting up 5,000 hectares of new plantings over a 10-year period (Tahal Report). Centralized fermentation units were also proposed to improve quality. In 1992, a study recommended setting up 1,000 hectares of new cocoa plantings on 15 hectares farms (Task Force Report). As previously proposed in the Tahal report, central fermentation units were again proposed. In 1996, MALMR submitted a Work Program calling for a rehabilitation plan for 7,500 hectares and a 3,000-ton increase in production over two years. It recommended that relations between CCIB and MALMR be redefined, with CCIB becoming the prime contractor for the project. In 1998, MALMR proposed a new action program with the setting up of 2,000 hectares of new plantings, using state farms. The latest attempt (1999) to rehabilitate cocoa cultivation would no longer fix quantitative objectives regarding areas or production volumes but proposed a set of incentive measures to revive production: 26 percent increase in the price of cocoa and coffee. Subsidy of 4,000 TT$/ha for setting up new coffee or cocoa plantings. Subsidy of 2,000 TT$/ha for rehabilitating old plantings. Subsidy amounting to 10 percent of the cost of work, with a ceiling of TT$ 10,000, for the installation of central fermentation units.
  38. 38. 33 Producer training in fermentation and drying. 2.6.4 Experience with the experimental fermentation unit. During the 1997-98 season, a pilot central fermentation unit was set up on PMA premises, with the objective of producing high quality cocoa. Producers delivered fresh beans to the unit. This experiment showed that such units are difficult to operate, and farmers are not enthusiastic about them. Farmers have the feeling that they have not been paid the true value of the dry cocoa. That is easy to understand, since the fresh beans lose large amounts of water as soon as they are removed from the pods and placed in boxes. Deliveries have been staggered in time, and the mean moisture rate varies considerably. A study of the conversion rates shows that the dry fermented cocoa to fresh cocoa ratio varies from 40 to 25 percent. Even with satisfactory conversion rates, farmers judge that it is in their interest to ferment their cocoa themselves. It is farmers’ experience that fermenting does not take much work. Processing costs at the central unit have been too high, and the obligation to deliver at predefined, specific periods is too restrictive. At the pilot unit, it was found that the quality of the beans delivered was highly heterogeneous, including over-ripe and under-ripe beans and beans from rotten or gnawed pods. There were also supply problems in that the dry cocoa to fresh bean conversion rate was too variable. Although not mentioned by pilot unit management, it is also likely that fermentation quality was not good. Indeed, when beans with very different moisture rates are placed in boxes together, fermentation is difficult to manage properly. There are risks of obtaining over- or under-fermented beans. A similar pilot experiment was conducted in the Ivory Coast (Africa) in the early 1980s. Despite substantial technical facilities and fermentation with sensors measuring the temperature
  39. 39. 34 and oxygen concentration in the mass, it took two years to master the process. The project was abandoned because of supply problems and also because it was so complicated to monitor the fermentation process. The search for the best possible quality is a worthwhile objective, but depriving producers of a part of their normal activities is psychologically frustrating. Apart from the technical problems that could be solved, delivering fresh beans to a central fermentary turns a producer into virtually a poorly paid farm laborer. The quality issue is considered in too global a way, and the first thing to be done is to ascertain market requirements by breaking down the quality concept as follows: Organoleptic quality, which primarily depends on the variety cultivated. Physical quality of the product, which concerns the absence of defects in batches. In this case, a farmer is quite capable of sorting his beans. Fermentation quality (under- and over-fermented beans). The technical solution may lie with central fermentation units, but it also lies with the producer. Heap or basket fermentation can give excellent results when it is not possible to carry out box fermentation. Fermentation quality primarily depends on the volume of beans and good practices (draining off the sweatings, protecting from rain, and cooling of the mass). As a reference, most of the cocoa in Ghana is fermented in heaps. 2.6.5 Overall conclusions regarding experience with government intervention and challenges for future policy. In an attempt to compensate for the drop in cocoa and coffee production and protect producers from market fluctuations, the Government in Trinidad, as have many countries, has set up a price stabilization and support structure. The oil boom led to profound economic upheaval, resulting in higher labor costs overall. In order to try to remain
  40. 40. 35 competitive on the world market, the cocoa and coffee prices paid to producers were frozen for about 15 years while the costs of production increased. It is essential to remember that any crop is intended to provide a living for at least the family that grows it, whether it be consumed by the family or marketed. It is also quite frequent that the personal interests of the farmer do not coincide with national interests, especially where commercial crops earmarked for export markets are concerned. Policymakers forget that too often. By setting up structures and support schemes, they do not take into account the true needs of all the stakeholders in the sector. Each intervention was based on a strictly technical approach, without taking into account the needs of producers. That is probably the main reason the steps taken had such disappointing results. While it is easy to fix land area and production targets in the office of a ministry, achieving such targets, which must take the human factor into account, is a more difficult, if not impossible, mission. With respect to the latest measures taken by MALMR, it is virtually certain that there will be little, if any, impact on production. It is not even certain that producers are interested in the subsidies, given the dire straits in which they find themselves. Moreover, the price increase is considered normal, but none of the contacted farmers wished to devote any more effort to his plantation. The major handicap of cocoa in Trinidad is its production cost, which approximates the level of world prices. Improving productivity of the cocoa plantings is undoubtedly the best way of lowering unit production costs, but it would be utopian in the short- or intermediate-term to expect an increase in productivity from 100-150 kg/ha to more than 600 kg/ha through various
  41. 41. 36 government incentive programs. Such an approach is totally unrealistic as no country in the world has been able to increase productivity five-fold in that way. Trinidad and Tobago is now in a critical situation where the prices paid to producers are higher than world market prices. As a result, Trinidad can no longer compete with the major producing countries. A few more profitable crops (citrus, banana, pineapple) are replacing cocoa and coffee. Cocoa and coffee have advantages over these fruits because they are dry products that are easy to store and transport, whereas fruits are perishable and have to be transported fresh to the consumption centers, as there is little processing at present. Nevertheless, Trinidad benefits from some positive assets for cocoa and coffee production, including: A considerable shortfall in coffee production for local roasting and the instant coffee industry should make it possible for producers and industrialists to work together to increase current production. The coffee policy must first and foremost answer the following question: Should green coffee be considered as an export product, or should it be produced for the domestic market? Cocoa quality is greatly appreciated by the premium chocolate industry, and this opens up a niche market opportunity, where world prices have less impact. The prospects for extending these niche markets are also favorable. For cocoa the foremost questions are: Does the future lie in the bulk cocoa markets, as an improver of average quality cocoas, or as a cocoa for the butter industry? Should niche markets be sought and expanded? Additional questions raised by this analysis include: Is it worth maintaining support for cocoa because of its contribution to social demand, sustainability, and the well being of rural
  42. 42. 37 populations? Would it be better to abandon these programs and grow other crops? In the latter case, which crops and for which existing and potential markets? The remainder of this needs assessment will attempt to provide recommendations relative to these questions. 3.0 Recommendations 3.1 Remove coffee from CCIB and liberalize its trade. Apart from the political aspects of guaranteed prices, there is no justification for maintaining coffee within CCIB. Neither is there any technical justification for maintaining the Producer Buying Agent (PMA)-CCIB link to the industry segment of the market channel. It would be simpler and more efficient to have direct sales from producers to industry buyers. Such a sub-sector liberalization should be carried out as soon as possible, giving priority to the need to supply the local processing industries for domestic consumption. The consultancy agrees with CCIB's comment that unless local coffee processors are prepared to make a major contribution the local coffee industry, it will die. It disagrees that this prescribed death is inevitable. Market forces and the profit incentives provided by them are powerful. Major contributions and leadership are manifestations of successful entrepreneurship that should not be assumed to be absent in Trinidad and Tobago. In order to avoid total disorganization of the coffee sector and risk seeing production disappear completely, a transition period will be necessary. This should be accomplished by: 1. Setting up an interprofessional committee comprising seven members (including two producer representatives, two industrial representatives, two representatives of CCIB and/or MALMR, and one research representative). The committee should remain in place after the transition period. The role of this committee will be to promote coffee production to supply the local industry. In particular, it will be responsible for
  43. 43. 38 making the necessary recommendations for research and extension needs. The committee will be responsible for circulating all technical and economic information to producers, along with information about desirable quality standards. However, MALMR and the Central Statistics Office (CSO) will need to play a key role in timely data collection and summarization. 2. Launching a series of information meetings for producers and industry representatives with cooperation from Extension specialists. 3. Introducing an incentive system for local buying and maintaining guaranteed and fixed prices for a limited period, but negotiated with producers and industries. In the event of lower world prices than fixed prices, the differentials will have to be reduced to favor green coffee manufacturers as an incentive to buy local coffee. 4. Encouraging the creation of private sector producer associations. After the transition period, prices paid to producers must vary with world prices. Prices fixed by government should be removed. Producers will need to negotiate with industry buyers to arrive at domestic prices. MALMR will need to collect, and distribute to producers (and industry), economic information on production, consumption, and prices (both domestic and international). CCIB welcomes the establishment of an interprofessional coffee committee with the suggested tasks. However, it feels that the committee is unlikely to be effective unless linked to an agency with dedicated resources. The consultancy does not subscribe to this fatalistic attitude regarding the potential effectiveness of the suggested interprofessional committee. All that would be required is an initial appointment by the Minister of an organizing committee with the prescribed membership, to be followed by a staggered election/appointment process.
  44. 44. 39 3.2 Open up the cocoa export market to the private sector. Private individuals, whether farmers or not, should be permitted to purchase cocoa from producers and export it directly themselves. This access to exports should be introduced gradually, by granting one or two additional licenses per year over three to five years, with CCIB also remaining a cocoa buyer. The following steps should be initiated as soon as possible, but within two years: Create an interprofessional cocoa committee, whose role would be essentially the same as the coffee committee, but would also be involved in defining rules for transactions in export markets and their linkage to domestic markets. This committee will differ from the interprofessional coffee committee, as the markets are different. However, the balance of representation should be in favor of producers. CCIB recommends that this interprofessional committee be part of or report to the Board. The consultancy disagrees because this would be a means by which CCIB could exercise control. The interprofessional committee should be independent of CCIB. Maintain the guaranteed price during this period of three to five years but permit private exporters the option of buying above this guaranteed price. CCIB comments that it was established to help small- and medium-size producers who were disadvantaged by the practices of private exporters. Moreover, it indicates that Trinidad's cocoa industry is not large enough to support a multi-exporter system. The consultancy responds that it would only anticipate three to five exporters during the transition period (including CCIB). In the longer run, competitive forces may result in only two or three exporters. There is currently at least one profitable private exporter that is of the size that the consultancy's proposed structure would indicate. Moreover, niche market buyers prefer to deal with private firms rather than public
  45. 45. 40 institutions. This proposal will bring private individuals into competition with each other, as well as with CCIB. Allow exporters to seek out markets and sell in those markets--the aim being to develop niche markets. The final objective of this strategy must be the definition of Trinidad and Tobago cocoa in the same context as Kona and Blue Mountain coffee or as wine produced in the St. Emillion or Medoc regions of France. This requires an excellent knowledge of demand, which would be acquired by exporters, and the adjustment of production to demand. CCIB indicated an interest in exporting niche market cocoa, but has not done anything about it. The strategy employed by CCIB of producing cocoa first and then trying to find markets will certainly fail. During the transitional phase, CCIB should have the role of monitoring operations to ensure that rules are respected and to prevent illicit agreements in the private sector. In other words, it should serve the function of maintaining and certifying quality as requested by the interprofessional cocoa committee. However, CCIB should not intervene in the international transactions of the private sector, but it will have the possibility of developing its own markets. Encourage the creation of producer associations. 3.3 Modify the cocoa quality buying system. The following steps need to be taken to assure the initial stage of the evolution of the cocoa sector. Phasing out the practice of pricing according to grade with a systematic deduction of two percent for each level, and fixing a single price for bulk cocoa having a number of acceptable defects and moisture content.
  46. 46. 41 Introduction of a system of payment for quality, based on bonuses and discounts, depending on the quality delivered. Demand greater rigor from producers regarding cocoa quality by (1) refusing inadequately sorted deliveries and (2) refusing inadequately dried cocoa. These steps need to be taken as soon as possible, while conducting an information and awareness drive aimed at producers. CCIB objected to the notion that cocoa prices should be based on prices relative to market demand conditions. They contended that purchase by grade should be maintained because in the world market the decision to purchase is as much based on nib yield as on flavor considerations. The consultancy strongly objects to this view, having verified with at least one French luxury chocolate manufacturer that these manufacturers look more to special flavor considerations than to nib yield, simply because they can get cocoa butter very easily. In addition, they contend that purchasing on grade reduces costs and losses to the Board. They wanted to know how this consultancy would define quality. This consultancy would introduce a pricing system based on two main factors: Moisture content with a system of bonuses and discounts, developed based on careful study and experience, an example of which follows (Table 6): Table 6. Moisture Table Example Discounts No bonus/No discount Bonuses 11.6 - 12.0% -1% 10.6 - 10.9% +1% 12.1 - 12.5% -2.5% 11 - 11.5% 10.1 - 10.5% +2.5% 12.6 - 13% -4% <=10.0% +4% >13% rejected Defects, including factors such as slatey, flat, mouldy, smoky, germinated, insect damaged, and over- or under-fermented beans. The weight each of these factors
  47. 47. 42 should receive depends on the targeted markets. All of these defects result from bad post-harvest practices. A quality coefficient would be objectively determined based on a composite sample of 300 grams of cocoa out of which 100 grams would be randomly cut for testing. However, farmers can readily be trained to detect defects without a cut-test so that sorting can be done on farm. Thus the consultancy defines cocoa quality as related to given levels of moisture and defects in the cocoa bean. The consultancy's analysis indicates that the future of Trinidad and Tobago's cocoa industry is dependent on its ability to implement such a pricing system that takes advantage of the special flavors contained in its cocoa. Nib yield is used to measure the quantity of cocoa butter, which has no distinctive flavor. Bean size, which is the current main indicator of quality, is mainly related to climatic conditions and varieties grown. Bean size is not an indicator of flavor in cocoa beans. Quality, as defined by this consultancy, is the critical factor rewarded by flavor bean markets. The Trinidad cocoa industry cannot survive serving a bulk market. To achieve greater product uniformity, CCIB's comments indicate that it would have preferred that this consultancy recommend the establishment of central fermentaries. While the idea makes intuitive sense, each attempt to do this has failed. Sales by producers to central fermentaries make the producers less concerned with quality. Fermenting and drying cocoa is not a difficult activity, especially when growers harvest 100 to 200 kilograms (kg) wet beans. Weeding, spraying, and management of shade are much more difficult than churning 100 kg of beans, three times a week, every month. This consultancy disagrees with the position that successful exporting countries have central fermentaries. Where large successful fermentaries do

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