Cocoa farming presents one of the best investment opportunities in agribusiness. The cocoa plant is a small, evergreen tree that grows exclusively in the deep tropical regions of the world. A cocoa tree usually matures and begins to bear fruit (pods) when it is about four or five years old. On the average, a single cocoa tree produces between 20 and 30 pods at a time. Each pod contains about 20 to 50 seeds, known as cocoa beans. These beans are the goldmine of the cocoa plant because they are processed into cocoa liquor, cocoa butter, cocoa powder, and chocolate.
About 70 percent of the world’s cocoa is grown and harvested in Africa. Cote D’Ivoire, Ghana, Nigeria and Cameroon are Africa’s largest producers but there is still unexploited potential in other West and Central African countries that are also well suited for cocoa production.
There is a huge market for both raw and processed cocoa and its derivatives locally and internationally. The global market for chocolate and cocoa beverages, of which cocoa is the major ingredient, is worth over $200 billion (and growing) every year.
Although chocolate is the biggest and most popular cocoa product, it is not the only cocoa product in high demand. Cocoa beverages are also heavily consumed in developing regions of the world. According to Oxfam, the demand for cocoa is growing to a point that some experts warn that the world may run out of affordable supplies of cocoa within 20 years. More pressure will be exerted on this already high demand by countries like China and India which will have over 450 million people joining the middle class over the next ten years.
As a result of explosive population growth, more people in the developing world will depend on cocoa farmers to produce the valuable beans used for producing these beverages. And because cocoa can be grown in only a few other places outside Africa, the high demand for cocoa products will provide a steady and lucrative market for cocoa producers.
Opportunities for entrepreneurs
Cocoa business remains an interesting opportunity for entrepreneurs. A bag of Cocoa is currently sells for around $200 (about N40,000). For 1,000 bags, that will fetch $200,000 (about N40 million) cash.
Cost of investment varies with type and scope of investment, but typical returns for an investment of N15 million in cocoa cultivation are as follow: Year 1 – Nil; Year 2 – Nil; Year 3 – N1,687,500 ; Year 4 – N7,875,000; Year 5 – N15,000,000; Year 6 – N18,750,000; Year 7 – N25,312,500. From Year 7, return on investment remains constant at N25,312,500 per annum.
Support for farmers
But while the cocoa business may seem very lucrative on the outside, many cocoa growers are very poor people. This is because middlemen and giant chocolate companies have found a way to take a significant chunk of profits while leaving very little for the poor farmers. As a result of the little returns made by cocoa farmers over the past few years, many of them have become frustrated and are increasingly abandoning cocoa to cultivate more profitable crops like rubber and oil palms.
To prevent the collapse of international cocoa industry, governments, NGOs and big chocolate companies are now making huge efforts to make cocoa production more lucrative for African farmers. Nestle and Cargill, two of the world’s largest food companies that sell a lot of chocolate products are investing millions of dollars to train African cocoa farmers and providing disease-resistant and high-yielding varieties for farmers.
Nestle’s Cocoa Plan is an initiative that will invest over $120 million in cocoa development over the next ten years. Cargill calls its program the Cocoa Promise. The program has trained over 90,000 farmers in Cote D’Ivoire to improve their skills in cocoa cultivation. To increase the amount of money farmers can make from the cocoa business and encourage sustainable cocoa production, NGOs like Fairtrade, Rainforest Alliance and UTZ have set up certification programs to protect cocoa farmers and increase the profit potential of their produce.
Fairtrade for example has a very interesting program which assures that farmers are never paid below $2,000 per ton to protect them from the often wild swings in cocoa prices. Also, the Cocoa Research Institute of Nigeria (CRIN) provides early-maturing, high-yielding, disease-resistant cocoa beans can help double farm production in two years.
These varieties of cocoa plants mature in about 18 months, while the traditional cocoa crop takes about four to five years to mature. The new varieties produce 1.5 metric tons of cocoa per hectare each season compared with the older types which yield 0.5 metric ton.
Ogun State government has alerted interested investors to opportunities that exist in Cocoa plantation and establishment of processing plants in the state, with the government ready to facilitate access to land and provide necessary support and enabling environment.
Governor Ibikunle Amosun said at an investment forum: “Having realised that land is a key factor for meaningful agricultural development, our administration has allocated over two hundred thousand hectares of land to willing investors in agriculture at a minimal cost. We have identified some particular sectors in agriculture as presenting viable business opportunities for investors.