1 00:00:08,840 --> 00:00:12,639 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:12,840 --> 00:00:16,960 Speaker 1: I'm Joe Wisenthal and I'm Tracy allows. You know, Tracy, 3 00:00:17,320 --> 00:00:21,919 Speaker 1: there's some commodities out there that I feel like what 4 00:00:22,200 --> 00:00:25,960 Speaker 1: people talk about them, they don't always take them very 5 00:00:25,960 --> 00:00:33,720 Speaker 1: seriously as commodities, as serious markets. Um, I'm trying to think, now, 6 00:00:34,280 --> 00:00:38,760 Speaker 1: live hogs maybe, well that's probably one. Another one I 7 00:00:38,760 --> 00:00:42,280 Speaker 1: would say is the marijuana industry still, you know, But 8 00:00:42,320 --> 00:00:45,200 Speaker 1: now we're gonna be talking about another commodity about which 9 00:00:45,280 --> 00:00:48,120 Speaker 1: I feel like people often like to make jokes or 10 00:00:48,960 --> 00:00:55,000 Speaker 1: maybe don't realize is very serious business, and that is coco. Coco. 11 00:00:56,160 --> 00:01:00,560 Speaker 1: I love chocolate. Yeah, exactly. See, you've proved my point, 12 00:01:00,560 --> 00:01:04,440 Speaker 1: which is that as soon as the conversation turns to 13 00:01:04,600 --> 00:01:08,560 Speaker 1: cocoa or chocolate, usually people start getting into some sort 14 00:01:08,560 --> 00:01:11,520 Speaker 1: of aesthetic discussion about how worse they love it, and 15 00:01:11,840 --> 00:01:13,960 Speaker 1: you know which you never hear of, say, we're talking 16 00:01:13,959 --> 00:01:19,559 Speaker 1: about copper or palladium. That's right. People don't start talking 17 00:01:19,600 --> 00:01:22,960 Speaker 1: about their favorite like shades of metals when they're talking 18 00:01:23,000 --> 00:01:25,399 Speaker 1: about precious metals. That's very true. Whereas I feel a 19 00:01:25,480 --> 00:01:27,679 Speaker 1: very very strong urge right now to talk about my 20 00:01:27,720 --> 00:01:30,880 Speaker 1: favorite brands of chocolate, but I will resist. Well, it's 21 00:01:30,920 --> 00:01:34,679 Speaker 1: not that it's uh irrelevant perhaps to our conversation, but 22 00:01:35,240 --> 00:01:38,600 Speaker 1: it is good to remind people that there is a serious, 23 00:01:38,640 --> 00:01:43,440 Speaker 1: traded commodity market that underlies the chocolate that they love 24 00:01:43,800 --> 00:01:47,800 Speaker 1: and has some very interesting market dynamics in terms of 25 00:01:48,040 --> 00:01:51,640 Speaker 1: who supplies it, who grows it, who buys it. That 26 00:01:52,160 --> 00:01:55,920 Speaker 1: makes it a perhaps more interesting story than just something 27 00:01:56,000 --> 00:01:59,240 Speaker 1: very sweet and tasty to eat. Well, I'm intrigued. I 28 00:01:59,280 --> 00:02:01,920 Speaker 1: think we should talk about the serious side of chocolate, 29 00:02:02,000 --> 00:02:04,440 Speaker 1: and I will try very very hard not to make 30 00:02:04,480 --> 00:02:08,240 Speaker 1: any jokes. Okay, Well, today we are going to be 31 00:02:08,400 --> 00:02:11,560 Speaker 1: talking to Christy Leslie. She is a professor at the 32 00:02:11,680 --> 00:02:16,680 Speaker 1: University of Washington bothel and she is also the author 33 00:02:16,720 --> 00:02:20,160 Speaker 1: of a book all about the coco market called Coco. 34 00:02:20,320 --> 00:02:24,600 Speaker 1: I've spoken to her on TV on my TV show 35 00:02:24,840 --> 00:02:27,640 Speaker 1: What You Missed that I co host about the incredible 36 00:02:27,760 --> 00:02:31,239 Speaker 1: rally that we've seen this year in the price of coco, 37 00:02:31,400 --> 00:02:34,040 Speaker 1: and I was so fascinated by the dynamics of the 38 00:02:34,080 --> 00:02:37,680 Speaker 1: coco market that I wanted to learn more and really 39 00:02:37,760 --> 00:02:48,120 Speaker 1: dive into how this commodity market really works. Christie, thank 40 00:02:48,160 --> 00:02:51,080 Speaker 1: you very much. For joining us. Yeah, no, thanks for 41 00:02:51,120 --> 00:02:54,720 Speaker 1: having me. It's great to talk again. And um, I 42 00:02:54,800 --> 00:02:59,680 Speaker 1: really appreciate very much your comments about taking coco seriously. 43 00:03:00,200 --> 00:03:03,840 Speaker 1: When I did my PhD by studying cocoa and chocolate, 44 00:03:04,639 --> 00:03:07,160 Speaker 1: it was it was actually pretty difficult to be taken 45 00:03:07,200 --> 00:03:09,880 Speaker 1: seriously as a scholar, at least in the beginning, because 46 00:03:09,919 --> 00:03:13,400 Speaker 1: people immediately wanted, just as you say, to start talking 47 00:03:13,400 --> 00:03:17,280 Speaker 1: about their their favorite chocolate. No imagined like if you 48 00:03:17,360 --> 00:03:22,720 Speaker 1: had written, say, a book about how the soybean market 49 00:03:23,000 --> 00:03:26,520 Speaker 1: or the corn market worked, no one would really question 50 00:03:26,680 --> 00:03:30,519 Speaker 1: that it was serious scholarship and serious business. But of course, 51 00:03:30,919 --> 00:03:34,400 Speaker 1: I guess if you write about chocolate, immediately people think 52 00:03:34,480 --> 00:03:37,080 Speaker 1: maybe it's a bit more of a frivolity or something 53 00:03:37,120 --> 00:03:41,120 Speaker 1: that is, uh yeah, not that serious. I really think so. 54 00:03:41,600 --> 00:03:44,880 Speaker 1: And I think it's because people don't usually have the 55 00:03:44,960 --> 00:03:49,400 Speaker 1: same kind of emotional relationship with soybeans or corn as 56 00:03:49,480 --> 00:03:54,360 Speaker 1: they do with chocolate, and so it's much easier for people, 57 00:03:54,400 --> 00:03:57,200 Speaker 1: I think, to make the transition to thinking about those 58 00:03:57,360 --> 00:04:02,040 Speaker 1: those things as serious traded goods. You know, But we 59 00:04:02,160 --> 00:04:06,640 Speaker 1: have such a strong we're we're passionate, we're collectively passionate 60 00:04:06,680 --> 00:04:09,640 Speaker 1: about chocolate. So you know, the first thing people think 61 00:04:09,680 --> 00:04:13,200 Speaker 1: of is their own personal experience rather than maybe the 62 00:04:13,680 --> 00:04:19,240 Speaker 1: larger economic context. Christie, I just realized something which I 63 00:04:19,240 --> 00:04:21,680 Speaker 1: should have said in the beginning, Where where are we 64 00:04:21,760 --> 00:04:24,919 Speaker 1: talking to? Where are you based right now? So I 65 00:04:24,960 --> 00:04:29,080 Speaker 1: am in Across which is the capital of Ghana and 66 00:04:29,320 --> 00:04:33,799 Speaker 1: in West Africa, And Ghana is the second largest cocoa 67 00:04:33,800 --> 00:04:37,479 Speaker 1: producing country in the world. The first largest is Ivory Coast, 68 00:04:37,520 --> 00:04:40,960 Speaker 1: which is right next door. And there's there's no cocoa 69 00:04:41,040 --> 00:04:43,600 Speaker 1: in Acrow itself. It's a very urban environment, so we 70 00:04:43,640 --> 00:04:46,159 Speaker 1: don't see that many cocoa trees around um, but not 71 00:04:46,279 --> 00:04:48,480 Speaker 1: too far outside there there's quite a bit of cocoa. 72 00:04:49,080 --> 00:04:52,880 Speaker 1: So I mentioned in the beginning that there were some 73 00:04:53,040 --> 00:04:58,039 Speaker 1: interesting aspects with where coco has grown. You mentioned Ghana, 74 00:04:58,200 --> 00:05:02,520 Speaker 1: you mentioned Ivory Coast. What does the global distribution overall 75 00:05:02,560 --> 00:05:07,600 Speaker 1: look like, how significant are these particular markets, what are 76 00:05:07,640 --> 00:05:10,120 Speaker 1: some of the other big ones, and just sort of 77 00:05:10,200 --> 00:05:14,680 Speaker 1: let breakdown where our coco comes from overall. Yeah, that 78 00:05:14,920 --> 00:05:19,120 Speaker 1: it's that's so important to to understanding this market. So 79 00:05:19,520 --> 00:05:24,160 Speaker 1: just the coco is indigenous to the Amazon River basin, 80 00:05:24,360 --> 00:05:27,919 Speaker 1: so it was born in Central and South America. And 81 00:05:27,920 --> 00:05:30,680 Speaker 1: it was first cultivated in Central and South America, and 82 00:05:30,720 --> 00:05:34,640 Speaker 1: that's that's important to know because today countries in that 83 00:05:34,760 --> 00:05:39,360 Speaker 1: region don't actually produce a lot of coco um Today 84 00:05:39,720 --> 00:05:43,880 Speaker 1: West Africa is really the predominant producer region, but by 85 00:05:43,880 --> 00:05:47,200 Speaker 1: by a lot. So about three quarters of all the 86 00:05:47,200 --> 00:05:49,760 Speaker 1: cocoa in the world now comes from Africa, and most 87 00:05:49,800 --> 00:05:53,080 Speaker 1: of that is in West Africa and so Ghana every 88 00:05:53,160 --> 00:05:56,200 Speaker 1: coast is number one, Ghana is number two, and then 89 00:05:56,720 --> 00:06:00,240 Speaker 1: Nigeria and Cameroon also in the region produced quite a 90 00:06:00,279 --> 00:06:02,640 Speaker 1: bit of cocoa as well. So really between these four 91 00:06:02,680 --> 00:06:06,679 Speaker 1: countries we're looking at a vast amount of cocoa. The 92 00:06:06,800 --> 00:06:12,279 Speaker 1: exception is Indonesia, which is the third largest producer in 93 00:06:12,320 --> 00:06:15,640 Speaker 1: the world, about nine or ten percent of all cocoa. 94 00:06:16,040 --> 00:06:19,640 Speaker 1: And what you see in Indonesia though, is a bit 95 00:06:19,680 --> 00:06:23,839 Speaker 1: different kind of coco processing, and so the beans that 96 00:06:23,880 --> 00:06:29,159 Speaker 1: come from Indonesia are typically not fermented, and that means 97 00:06:29,200 --> 00:06:31,760 Speaker 1: they can be used only in a in a different 98 00:06:31,800 --> 00:06:34,839 Speaker 1: way in the chocolate making process. So so when you're 99 00:06:34,839 --> 00:06:38,839 Speaker 1: looking at this foundation of the chocolate industry, we really 100 00:06:38,839 --> 00:06:42,039 Speaker 1: have to look at Africa. So how did that happen? 101 00:06:42,120 --> 00:06:45,400 Speaker 1: How did West Africa become the place for the majority 102 00:06:45,440 --> 00:06:49,920 Speaker 1: of the world's coco production. It's an interesting story. You know. 103 00:06:50,040 --> 00:06:53,559 Speaker 1: Partly it is to do with colonialism, and so when 104 00:06:54,320 --> 00:06:59,000 Speaker 1: Portugal and Spain decolonized the America's, when they when they 105 00:06:59,160 --> 00:07:03,200 Speaker 1: relinquish their on ease there, it sort of coincided with 106 00:07:03,600 --> 00:07:08,400 Speaker 1: a massive drop in production in the America's and that 107 00:07:08,480 --> 00:07:10,440 Speaker 1: was for a number of reasons. So you had two 108 00:07:10,440 --> 00:07:12,800 Speaker 1: things happening at the you know, around the same time 109 00:07:13,000 --> 00:07:17,240 Speaker 1: was was Portuguese and Spanish colonization and then subsequent d 110 00:07:17,360 --> 00:07:20,800 Speaker 1: colonization loss of production in the Americas. And at the 111 00:07:20,840 --> 00:07:23,080 Speaker 1: same around the same time were a little bit later 112 00:07:23,480 --> 00:07:28,200 Speaker 1: Britain and France colonizing Africa. The thing that was happening 113 00:07:28,480 --> 00:07:31,520 Speaker 1: not maybe in the background would not be the right 114 00:07:31,560 --> 00:07:33,400 Speaker 1: way to describe it, but the thing that was happening 115 00:07:33,400 --> 00:07:36,960 Speaker 1: in Europe at the time was that the chocolate industry 116 00:07:37,080 --> 00:07:41,120 Speaker 1: was born and it was growing. So you can imagine 117 00:07:41,200 --> 00:07:45,679 Speaker 1: the new chocolate companies, Cadburry among them, you know, Hershey 118 00:07:45,760 --> 00:07:49,720 Speaker 1: a little bit later, had just discovered that they could 119 00:07:49,760 --> 00:07:54,280 Speaker 1: sell chocolate, you know, and that it was extremely popular 120 00:07:54,320 --> 00:07:57,360 Speaker 1: with people. Um people started to develop a taste for 121 00:07:57,400 --> 00:07:59,480 Speaker 1: it in Europe. I mean, we're looking at a situation 122 00:07:59,520 --> 00:08:02,920 Speaker 1: where they US cann't get the beans from the Americas 123 00:08:03,040 --> 00:08:07,040 Speaker 1: to the same volumes as as they produced previously, and 124 00:08:07,440 --> 00:08:10,680 Speaker 1: turned to Africa where there was a lot of enthusiasm 125 00:08:10,800 --> 00:08:14,400 Speaker 1: for this new crop. Uh, coco was making people more 126 00:08:14,480 --> 00:08:17,760 Speaker 1: money here than than other export crops they were growing 127 00:08:17,760 --> 00:08:21,280 Speaker 1: at the time. The climate was really suitable for cocoa, 128 00:08:21,760 --> 00:08:24,000 Speaker 1: and you know, between the two of them, France and 129 00:08:24,000 --> 00:08:27,200 Speaker 1: Britain could exert a lot of colonial power. And so 130 00:08:27,320 --> 00:08:29,960 Speaker 1: you see this massive global shift. I mean, I just 131 00:08:30,000 --> 00:08:32,520 Speaker 1: described that to you in in a minute or two, 132 00:08:32,559 --> 00:08:35,840 Speaker 1: but really it happened over over decades, if not a 133 00:08:35,920 --> 00:08:38,840 Speaker 1: century or more. So it wasn't an overnight shift. But 134 00:08:38,920 --> 00:08:42,880 Speaker 1: that's the basics of it. So, Christie, the first time 135 00:08:42,920 --> 00:08:45,800 Speaker 1: we talked, and we were talking about the incredible rally 136 00:08:46,080 --> 00:08:51,120 Speaker 1: that we had seen in coco prices this year, how 137 00:08:51,200 --> 00:08:56,440 Speaker 1: much of the pricing of coco is essentially just a 138 00:08:56,520 --> 00:09:00,679 Speaker 1: function of the weather conditions at any given time in 139 00:09:00,720 --> 00:09:04,679 Speaker 1: West Africa. Yeah, it would It would be impossible for 140 00:09:04,720 --> 00:09:07,240 Speaker 1: me to quantify it, so I couldn't put in an 141 00:09:07,240 --> 00:09:11,400 Speaker 1: exact figure on how much is the weather I tend 142 00:09:11,800 --> 00:09:16,760 Speaker 1: to put more faith in the weather as the driver 143 00:09:17,000 --> 00:09:22,360 Speaker 1: than maybe some other analysts. I just don't see other 144 00:09:22,720 --> 00:09:27,480 Speaker 1: factors contributing as much, unless unless it's politics. Really, so 145 00:09:27,880 --> 00:09:32,240 Speaker 1: the other another big driver of price is the political 146 00:09:32,320 --> 00:09:35,160 Speaker 1: situation in this part of the world. So, for example, 147 00:09:35,600 --> 00:09:39,480 Speaker 1: during periods of conflict and Ivory Coast, even though Coco 148 00:09:39,640 --> 00:09:43,520 Speaker 1: still moved out of the country, sometimes in very large quantities, 149 00:09:44,000 --> 00:09:49,080 Speaker 1: the when there was conflict in the possibility that Coco 150 00:09:49,240 --> 00:09:52,200 Speaker 1: might not be getting out of Ivory Coast, then we 151 00:09:52,280 --> 00:09:55,040 Speaker 1: saw that drive the price up as well. So you know, 152 00:09:55,200 --> 00:09:59,719 Speaker 1: really it's any anything that that shortened supply, anything that 153 00:10:00,280 --> 00:10:06,360 Speaker 1: supply potentially less, and really that's weather and and and 154 00:10:06,520 --> 00:10:10,080 Speaker 1: politics for the most part. So if I had a 155 00:10:10,160 --> 00:10:13,600 Speaker 1: really good weather forecasting machine, would I be able to 156 00:10:13,640 --> 00:10:18,240 Speaker 1: almost perfectly predict the cocoa price. No, because we're at 157 00:10:18,240 --> 00:10:20,640 Speaker 1: the end of the day, we're dealing with people and 158 00:10:20,720 --> 00:10:24,760 Speaker 1: so people, you know, the price doesn't happen kind of magically. 159 00:10:24,840 --> 00:10:28,719 Speaker 1: It happens, but you know, because people, traders and companies 160 00:10:28,760 --> 00:10:32,520 Speaker 1: are making decisions about whether to buy your sell coco right, 161 00:10:32,760 --> 00:10:35,160 Speaker 1: and so you know, they take into account much more 162 00:10:35,200 --> 00:10:38,760 Speaker 1: than the weather and um one of the other things 163 00:10:38,800 --> 00:10:41,960 Speaker 1: that they take into account obviously is demand, and so 164 00:10:42,320 --> 00:10:46,640 Speaker 1: we can we would also need to bring that input 165 00:10:46,720 --> 00:10:49,440 Speaker 1: in as well, and demand can be of course another 166 00:10:49,600 --> 00:10:52,240 Speaker 1: big price driver. The thing is about chocolate is that 167 00:10:52,320 --> 00:10:56,000 Speaker 1: demand doesn't tend to diminish that much. It's it's kind 168 00:10:56,000 --> 00:10:59,959 Speaker 1: of steadily grows over time, and especially when when new 169 00:11:00,040 --> 00:11:02,880 Speaker 1: markets and Asia started to develop, and there we really 170 00:11:02,880 --> 00:11:06,880 Speaker 1: mean China and India, we had an even kind of 171 00:11:06,920 --> 00:11:11,120 Speaker 1: bigger boost in demand. And so you know, demand influences price. 172 00:11:11,360 --> 00:11:14,120 Speaker 1: If if the big companies say they're not processing as 173 00:11:14,160 --> 00:11:17,880 Speaker 1: much coco one year or to the next, that can 174 00:11:17,920 --> 00:11:21,440 Speaker 1: also make a difference on price. But overall, you know, 175 00:11:21,520 --> 00:11:24,880 Speaker 1: it's a pretty people still like to eat chocolate and 176 00:11:24,920 --> 00:11:28,360 Speaker 1: that's not going away. Christie. Would we think of the 177 00:11:28,400 --> 00:11:31,160 Speaker 1: price of a commodity? I think sometimes we think that 178 00:11:31,160 --> 00:11:34,160 Speaker 1: that price arrives kind of by magic, or at least 179 00:11:34,240 --> 00:11:37,280 Speaker 1: I do. I sit at my Bloomberg terminal, I start 180 00:11:37,440 --> 00:11:40,880 Speaker 1: typing in coco. It brings up a cocoa future and 181 00:11:40,920 --> 00:11:43,000 Speaker 1: I can look at it on a chart. But of 182 00:11:43,000 --> 00:11:46,320 Speaker 1: course that price has to be derived from real people 183 00:11:46,559 --> 00:11:50,920 Speaker 1: making real transactions on the ground, buyers and sellers walk 184 00:11:51,000 --> 00:11:54,280 Speaker 1: us through the market structure a little bit. So a 185 00:11:54,320 --> 00:11:58,840 Speaker 1: farmer in Ghana grows coco, then what what is the 186 00:11:59,160 --> 00:12:02,600 Speaker 1: sort of supply chain at which the clearing price of 187 00:12:02,640 --> 00:12:05,960 Speaker 1: cocoa is set? Yeah, you know, and interestingly, you know, 188 00:12:06,000 --> 00:12:09,480 Speaker 1: the prices set on the futurest market, which is not 189 00:12:09,640 --> 00:12:12,360 Speaker 1: people operating on the ground. And so you know, the 190 00:12:12,720 --> 00:12:16,640 Speaker 1: people trading futures are not coco farmers. So there's two 191 00:12:16,679 --> 00:12:20,400 Speaker 1: future markets for cocoa in New York and London, and 192 00:12:20,600 --> 00:12:23,360 Speaker 1: the people making those decisions are definitely not the on 193 00:12:23,440 --> 00:12:26,760 Speaker 1: the ground traders, their futures traders, and so they're sitting 194 00:12:26,760 --> 00:12:30,440 Speaker 1: at desks in New York and London and making these decisions. Um, 195 00:12:30,559 --> 00:12:32,360 Speaker 1: so the price is set in a bit more of 196 00:12:32,360 --> 00:12:37,679 Speaker 1: a top down fashion. However, those traders rely on reports 197 00:12:37,920 --> 00:12:41,040 Speaker 1: from people who are on the ground. And so those reports, 198 00:12:41,040 --> 00:12:43,480 Speaker 1: of course are you know, about everything we've been talking about, 199 00:12:43,520 --> 00:12:48,480 Speaker 1: the weather, the productivity of trees, the farmer enthusiasm, the politics. Right, 200 00:12:48,760 --> 00:12:51,800 Speaker 1: so the information from the ground feeds into those those 201 00:12:51,800 --> 00:12:54,280 Speaker 1: traders sitting at their desk in London and New York. 202 00:12:54,400 --> 00:12:56,880 Speaker 1: But then the price is really set at that level. 203 00:12:57,640 --> 00:13:00,720 Speaker 1: I'll answer your question and talking through the the steps 204 00:13:00,760 --> 00:13:03,520 Speaker 1: and just with the caveat that they're they're different in 205 00:13:03,559 --> 00:13:06,480 Speaker 1: Ghana to where they in other countries. And the reason 206 00:13:06,640 --> 00:13:11,440 Speaker 1: is because Ghana has a very highly regulated market where 207 00:13:11,440 --> 00:13:16,160 Speaker 1: the government controls many aspects of the trade of cocoa. 208 00:13:16,320 --> 00:13:18,440 Speaker 1: And so the first thing that a farmer would do 209 00:13:19,280 --> 00:13:23,480 Speaker 1: is they sell to a buyer. In Ghana, there are 210 00:13:23,679 --> 00:13:27,439 Speaker 1: licensed buying companies and so there's you know, maybe two 211 00:13:27,480 --> 00:13:30,240 Speaker 1: dozen of them that operate in the country, maybe ten 212 00:13:30,320 --> 00:13:33,199 Speaker 1: or twelve of them are significant in terms of market share, 213 00:13:33,720 --> 00:13:39,160 Speaker 1: and those buyers tend to farmers organized in their villages 214 00:13:39,520 --> 00:13:43,120 Speaker 1: and decide more or less together which of those buyers 215 00:13:43,160 --> 00:13:45,920 Speaker 1: they're going to sell to. In the case of Ghana, 216 00:13:46,360 --> 00:13:52,240 Speaker 1: those buying companies then sell their cocoa to Ghana Cocoa Board, 217 00:13:52,520 --> 00:13:57,280 Speaker 1: which is a government body, and then Coco Board exports that. 218 00:13:57,760 --> 00:13:59,800 Speaker 1: So Ghana has a little bit of a different structure 219 00:13:59,880 --> 00:14:01,640 Speaker 1: that some of the other places which are not as 220 00:14:01,720 --> 00:14:07,640 Speaker 1: highly regulated. So is the majority of coco production in Africa? Then? 221 00:14:08,040 --> 00:14:11,160 Speaker 1: Is that still mostly done on an independent basis? Do 222 00:14:11,240 --> 00:14:15,839 Speaker 1: we not have big corporate plantations? And if not, why 223 00:14:15,960 --> 00:14:18,640 Speaker 1: hasn't that happened? Because you would assume that you know, 224 00:14:18,720 --> 00:14:21,560 Speaker 1: companies that are demanding large amounts of cocoa would try 225 00:14:21,560 --> 00:14:25,440 Speaker 1: to secure their supply. Yeah, that's a great question. There's 226 00:14:25,640 --> 00:14:29,960 Speaker 1: very little plantation agriculture in cocoa, and so you tend 227 00:14:30,040 --> 00:14:32,960 Speaker 1: not to see the big kind of corporate plantations that 228 00:14:33,040 --> 00:14:35,880 Speaker 1: you that you're talking about. They they exist, they're they're 229 00:14:35,920 --> 00:14:39,160 Speaker 1: around um and they might not even be owned by 230 00:14:39,160 --> 00:14:41,800 Speaker 1: a big chocolate company. They might just be owned by 231 00:14:41,840 --> 00:14:47,920 Speaker 1: a wealthy individual or a private company. But the estimates vary. 232 00:14:48,080 --> 00:14:50,680 Speaker 1: Of all cocoa is grown by smallholders, and so we're 233 00:14:50,680 --> 00:14:54,480 Speaker 1: talking about individual farmers who may farm their on land 234 00:14:54,640 --> 00:14:56,960 Speaker 1: or rent it out to someone else to farm, but 235 00:14:57,200 --> 00:15:00,160 Speaker 1: very very very small amounts. And so, you know, to 236 00:15:00,160 --> 00:15:03,120 Speaker 1: to get back to to Joe's question from earlier, there's 237 00:15:03,240 --> 00:15:07,120 Speaker 1: there's five million estimated coca farmers in the world. Each 238 00:15:07,200 --> 00:15:10,600 Speaker 1: one of them is selling to a buyer, and of 239 00:15:10,640 --> 00:15:13,640 Speaker 1: course there are fewer numbers of buyers, but still a 240 00:15:13,680 --> 00:15:17,000 Speaker 1: lot um. And then from there on up we start 241 00:15:17,040 --> 00:15:20,520 Speaker 1: to see the trading structure narrow really really quickly. So 242 00:15:20,560 --> 00:15:24,680 Speaker 1: we're talking about millions of farmers at the base, probably 243 00:15:24,760 --> 00:15:27,720 Speaker 1: millions of traders also who they're selling to and then 244 00:15:27,720 --> 00:15:29,760 Speaker 1: when we start to see the number of actors involved 245 00:15:29,840 --> 00:15:33,200 Speaker 1: kind of diminished pretty rapidly. I want to ask another 246 00:15:33,320 --> 00:15:36,480 Speaker 1: question about the supply side of that is the degree 247 00:15:36,480 --> 00:15:38,800 Speaker 1: of labor intensiveness of the crop. I know there's some 248 00:15:38,880 --> 00:15:42,080 Speaker 1: crops like grains, where you don't need a lot of labor, 249 00:15:42,280 --> 00:15:45,280 Speaker 1: can be done with a lot of machinery. How how 250 00:15:45,360 --> 00:15:50,440 Speaker 1: labor intensive is the actual planting and collecting of cocoa. 251 00:15:50,760 --> 00:15:54,920 Speaker 1: It's really it's it's really labor intensive. And and it's 252 00:15:55,000 --> 00:15:58,280 Speaker 1: such a good question because I think, you know, if 253 00:15:58,320 --> 00:16:00,680 Speaker 1: you think about the crops that we you know, grow 254 00:16:00,920 --> 00:16:05,800 Speaker 1: in America, wheat and soy and even corn, they can 255 00:16:05,840 --> 00:16:09,520 Speaker 1: be macoganized, mechanized so much more easily, you know, And 256 00:16:09,560 --> 00:16:12,800 Speaker 1: so wheat is a really nice comparison because you know, 257 00:16:12,880 --> 00:16:16,080 Speaker 1: wheat's been basically engineered to all grow at the same 258 00:16:16,120 --> 00:16:19,400 Speaker 1: height and all ripen at the same time, so that 259 00:16:19,520 --> 00:16:23,360 Speaker 1: a harvesting machine can just go through that field and 260 00:16:23,720 --> 00:16:27,880 Speaker 1: cut off all of the ripe, you know, wheat grains, 261 00:16:28,600 --> 00:16:31,600 Speaker 1: you know, at the same time. The opposite is true 262 00:16:31,640 --> 00:16:35,560 Speaker 1: for cocos. So you know, the trees do not the pods. 263 00:16:35,720 --> 00:16:38,240 Speaker 1: The cocoa pods do not all ripen at the same 264 00:16:38,320 --> 00:16:43,280 Speaker 1: time the tree. They ripen pretty much year round. There's 265 00:16:43,360 --> 00:16:46,760 Speaker 1: no real way to mechanize the harvest. It's got to 266 00:16:46,800 --> 00:16:49,760 Speaker 1: be done by hand. So each of those cocoa pods 267 00:16:49,960 --> 00:16:52,840 Speaker 1: is pretty big. Some of them can get almost as 268 00:16:52,840 --> 00:16:55,280 Speaker 1: big as like an American football, and they're around the 269 00:16:55,280 --> 00:16:58,840 Speaker 1: same they're about the same shape, and so they grow 270 00:16:58,960 --> 00:17:02,160 Speaker 1: on the trunk, they grow on some of the larger branches, 271 00:17:02,400 --> 00:17:05,560 Speaker 1: and and you can imagine you've got these big pods 272 00:17:05,600 --> 00:17:09,000 Speaker 1: sticking out from all around the tree, including on the trunk. 273 00:17:09,560 --> 00:17:12,040 Speaker 1: I mean, how could you mechanize that? And so so 274 00:17:12,280 --> 00:17:15,399 Speaker 1: really it's the labor of harvest. It's the labor of 275 00:17:15,480 --> 00:17:18,679 Speaker 1: breaking open those pods and scooping the seeds out, you know, 276 00:17:18,760 --> 00:17:20,920 Speaker 1: and of course all of the farm labor that goes 277 00:17:20,960 --> 00:17:25,000 Speaker 1: into it. So imagine you're in a tropical rainforest. That's 278 00:17:25,320 --> 00:17:29,880 Speaker 1: coco's home, that's where it's it's indigenous to rainforest. That's 279 00:17:29,920 --> 00:17:33,760 Speaker 1: not easy environmental work, and everything wants to grow there, everything, 280 00:17:33,920 --> 00:17:36,960 Speaker 1: and so you know, a lot of cocoa farm labor 281 00:17:37,320 --> 00:17:40,960 Speaker 1: is just keeping the farm clean, you know, doing the weeding, 282 00:17:41,160 --> 00:17:45,680 Speaker 1: which is not like pulling out a dandelion flower. We're 283 00:17:45,720 --> 00:17:49,600 Speaker 1: talking about some pretty hafty weeds that that need constant 284 00:17:49,640 --> 00:17:54,600 Speaker 1: removal and and maintenance. So I think pretty labor intensive 285 00:17:54,680 --> 00:17:58,240 Speaker 1: is the short answer to your question. So before we 286 00:17:58,280 --> 00:18:00,800 Speaker 1: move on to the demand side, have one more question 287 00:18:00,840 --> 00:18:05,600 Speaker 1: on production related to your point about labor intensiveness. You 288 00:18:05,680 --> 00:18:08,719 Speaker 1: mentioned that the price of cocoa, it's set on the 289 00:18:08,720 --> 00:18:12,520 Speaker 1: futures market way out in the west, but the people 290 00:18:12,560 --> 00:18:16,520 Speaker 1: setting that price rely on on the ground reports about production. 291 00:18:17,000 --> 00:18:19,919 Speaker 1: I'm just wondering how much of the futures prices that 292 00:18:19,960 --> 00:18:24,560 Speaker 1: are set actually trickled down to cash payments for the farmers. 293 00:18:24,640 --> 00:18:27,320 Speaker 1: Is it possible that there's a big rise in the 294 00:18:27,320 --> 00:18:31,800 Speaker 1: futures price for coco, but that doesn't necessarily entirely filter 295 00:18:31,960 --> 00:18:35,960 Speaker 1: down to the farmers. There is a relationship, and so 296 00:18:36,440 --> 00:18:38,680 Speaker 1: you know, if we take on out of the equation, 297 00:18:38,760 --> 00:18:41,760 Speaker 1: because here in Ghana, the government sets the producer price 298 00:18:41,840 --> 00:18:44,280 Speaker 1: every year and so they say how much the farmers 299 00:18:44,320 --> 00:18:48,280 Speaker 1: are going to get. And while that price does generally 300 00:18:48,400 --> 00:18:52,400 Speaker 1: follow the futures price because they set the price per season, 301 00:18:52,880 --> 00:18:57,040 Speaker 1: which is October through March, ish is the is the 302 00:18:57,080 --> 00:19:00,800 Speaker 1: productive pie. You know, the futures price might change a 303 00:19:00,840 --> 00:19:03,720 Speaker 1: lot during the season, but that price is fixed for 304 00:19:03,760 --> 00:19:08,520 Speaker 1: the duration. There's a similar situation Ivy Coast where they 305 00:19:08,560 --> 00:19:11,800 Speaker 1: set a minimum price. It's not as enforced. It's not 306 00:19:11,840 --> 00:19:14,600 Speaker 1: as enforced as well as it isn't gonna um. But 307 00:19:15,160 --> 00:19:19,359 Speaker 1: in all of these cases you have the futurist price 308 00:19:19,600 --> 00:19:24,200 Speaker 1: setting the that's the starting point, right, and over time, 309 00:19:24,320 --> 00:19:27,359 Speaker 1: as the futurist price moves up and down, we see 310 00:19:27,800 --> 00:19:30,919 Speaker 1: what we call farm gate prices, which is the price 311 00:19:31,000 --> 00:19:33,800 Speaker 1: that the farmer actually receives, you know, when she or 312 00:19:33,880 --> 00:19:37,600 Speaker 1: she settles their coca. We see farm gate prices also 313 00:19:37,760 --> 00:19:40,640 Speaker 1: move with the futurist price, but as you can imagine, 314 00:19:40,800 --> 00:19:45,280 Speaker 1: it doesn't happen instantaneously. And it's also because we're dealing 315 00:19:45,280 --> 00:19:48,439 Speaker 1: with five million cocoa farmers in the world and no 316 00:19:48,880 --> 00:19:52,920 Speaker 1: real mandate to collect all the price information from them. 317 00:19:52,960 --> 00:19:56,040 Speaker 1: It's a little bit challenging to say exactly how much 318 00:19:56,400 --> 00:20:00,480 Speaker 1: farm gate price changes and when it changes when the 319 00:20:00,520 --> 00:20:04,800 Speaker 1: futures price changes, but generally, over time we do see 320 00:20:04,840 --> 00:20:08,439 Speaker 1: the two following each other. All right, let's talk a 321 00:20:08,480 --> 00:20:11,600 Speaker 1: little bit about who is buying the cocoa. So we've 322 00:20:11,760 --> 00:20:15,760 Speaker 1: established that so much of the world's coco comes from 323 00:20:15,800 --> 00:20:21,640 Speaker 1: a few specific locations, highly concentrated. The buying is also, 324 00:20:21,800 --> 00:20:26,840 Speaker 1: I imagine pretty concentrated. I what percent of the world's 325 00:20:26,880 --> 00:20:31,120 Speaker 1: coco is bought by a few big sweets companies like 326 00:20:31,280 --> 00:20:36,160 Speaker 1: nest Lee and uh Cadbury. I imagine that that we're 327 00:20:36,160 --> 00:20:39,840 Speaker 1: all familiar with, oh, most of it. So, you know, 328 00:20:39,880 --> 00:20:41,800 Speaker 1: if we look at the structure of the industry, I said, 329 00:20:41,840 --> 00:20:44,200 Speaker 1: it narrows on the way up, and so you've got 330 00:20:44,200 --> 00:20:46,720 Speaker 1: millions of cocoa farmers. But then at the other end, 331 00:20:46,960 --> 00:20:50,199 Speaker 1: you just got a very few companies who predominate. And 332 00:20:50,240 --> 00:20:53,680 Speaker 1: so of course there are lots of chocolate companies, there 333 00:20:53,720 --> 00:20:56,640 Speaker 1: are lots of coco processors. But when we look at 334 00:20:56,680 --> 00:20:59,920 Speaker 1: the big ones, the ones with the really the signific 335 00:21:00,160 --> 00:21:04,400 Speaker 1: get market share in anyway, what we call them mature 336 00:21:04,520 --> 00:21:08,720 Speaker 1: chocolate markets, which are the kind of oldest industrial chocolate markets. 337 00:21:08,760 --> 00:21:11,640 Speaker 1: In ub in North America, we're looking at five chocolate 338 00:21:11,640 --> 00:21:16,000 Speaker 1: companies and three processors, you know, and so between these 339 00:21:16,040 --> 00:21:19,840 Speaker 1: companies they are really doing most of the buying. That's 340 00:21:19,840 --> 00:21:22,240 Speaker 1: not just they're not the only ones, obviously, but they're 341 00:21:22,240 --> 00:21:27,600 Speaker 1: the biggest ones. So those are the fundamental sources of demand. 342 00:21:27,720 --> 00:21:30,679 Speaker 1: Those big chocolate companies buying up coco. But are there 343 00:21:30,720 --> 00:21:35,840 Speaker 1: speculative sources of demand or speculative entities that are also 344 00:21:35,920 --> 00:21:39,120 Speaker 1: having an impact on price, Because when it comes to commodities, 345 00:21:39,160 --> 00:21:42,560 Speaker 1: one of the conversations that we're always having is, you know, 346 00:21:42,720 --> 00:21:45,960 Speaker 1: the paper versus physical price and the degree to which 347 00:21:45,960 --> 00:21:51,040 Speaker 1: speculative traders are actually impacting prices away from actual on 348 00:21:51,080 --> 00:21:55,159 Speaker 1: the ground demand. The futures market for coco is definitely 349 00:21:55,280 --> 00:22:00,480 Speaker 1: populated by by speculators as well as hedger you know, 350 00:22:00,600 --> 00:22:03,320 Speaker 1: when we say hedgers on that market, we're talking about 351 00:22:03,320 --> 00:22:07,080 Speaker 1: the big chocolate companies and the big processors who are 352 00:22:07,080 --> 00:22:10,720 Speaker 1: hedging their bets against a future price rise by buying, 353 00:22:10,960 --> 00:22:15,120 Speaker 1: you know, on the futures market. But absolutely speculators are 354 00:22:15,160 --> 00:22:19,359 Speaker 1: active in Coco futures. And the reason for that is because, 355 00:22:19,480 --> 00:22:21,600 Speaker 1: I mean, as we've been talking about this whole time, 356 00:22:21,720 --> 00:22:25,520 Speaker 1: coco is a commodity. It's price is volatile, and any 357 00:22:25,560 --> 00:22:29,440 Speaker 1: time you have a volatile price for for a good, 358 00:22:29,880 --> 00:22:32,840 Speaker 1: you've got the opportunity to place a bet on it 359 00:22:33,000 --> 00:22:37,520 Speaker 1: and potentially have a pretty big payoff. And so for sure, 360 00:22:37,640 --> 00:22:41,000 Speaker 1: I mean, Coco is very popular amongst speculators and in 361 00:22:41,040 --> 00:22:44,520 Speaker 1: those cases, they rely on the same information coming from 362 00:22:44,560 --> 00:22:46,920 Speaker 1: the ground. You know, they also need to be informed 363 00:22:46,960 --> 00:22:50,920 Speaker 1: about about disease outbreaks amongst coco trees, which we haven't 364 00:22:50,920 --> 00:22:53,240 Speaker 1: really talked about. They need to be informed about whether 365 00:22:53,359 --> 00:22:56,160 Speaker 1: they need to be informed about politics. They're using all 366 00:22:56,160 --> 00:22:59,800 Speaker 1: that same information, but not because they want to make chocolate, 367 00:22:59,840 --> 00:23:02,720 Speaker 1: but because they want to make a well educated guess 368 00:23:02,960 --> 00:23:04,960 Speaker 1: on what's going to happen to that price. And so 369 00:23:05,040 --> 00:23:09,399 Speaker 1: for sure, for sure, you know, with various commodities, of course, 370 00:23:09,440 --> 00:23:12,520 Speaker 1: there are certain data points that people look at to 371 00:23:12,680 --> 00:23:17,399 Speaker 1: sort of establish the fundamentals of supply and demand. With 372 00:23:17,920 --> 00:23:22,600 Speaker 1: corn and we we might look at acreage or or plantings, 373 00:23:22,640 --> 00:23:26,160 Speaker 1: and with oil, people might look at the latest rig 374 00:23:26,200 --> 00:23:29,639 Speaker 1: count data in the US. I know in the cocoa 375 00:23:29,760 --> 00:23:33,320 Speaker 1: market because I see the headlines from time to time. Uh, 376 00:23:33,359 --> 00:23:37,680 Speaker 1: there's something called the grindings data and what but I 377 00:23:37,680 --> 00:23:40,399 Speaker 1: don't even know what that is. What is the grindings data? 378 00:23:40,440 --> 00:23:42,800 Speaker 1: And what is that information telling us? What is grinding? 379 00:23:43,800 --> 00:23:47,960 Speaker 1: So grindings happen after the farm, so on the farm, 380 00:23:48,119 --> 00:23:52,320 Speaker 1: Cocoa is still an agricultural commodity. Once it gets into 381 00:23:52,359 --> 00:23:56,040 Speaker 1: a factory, it starts to change into a manufactured good, 382 00:23:56,359 --> 00:23:59,800 Speaker 1: a manufactured item, just like a toy or electronics or 383 00:23:59,800 --> 00:24:03,720 Speaker 1: manufactured chocolate is manufactured. And the first step is grinding 384 00:24:03,760 --> 00:24:08,480 Speaker 1: the beans. And so cocoa beans are really the seeds 385 00:24:08,600 --> 00:24:11,560 Speaker 1: of the fruit, and so that's what we make chocolate 386 00:24:11,600 --> 00:24:14,440 Speaker 1: out of, is the seed. They're pretty big seeds, they're 387 00:24:14,480 --> 00:24:18,439 Speaker 1: like maybe a bit bigger than an almond usually, and 388 00:24:18,480 --> 00:24:23,199 Speaker 1: those those seeds are fermented usually and then dry and 389 00:24:23,200 --> 00:24:27,119 Speaker 1: then they're really really really hard, like a pebble, and 390 00:24:27,160 --> 00:24:29,720 Speaker 1: you've got to grind them down, and so you that's 391 00:24:29,800 --> 00:24:33,360 Speaker 1: the first step into making them usable. So you could 392 00:24:33,359 --> 00:24:36,320 Speaker 1: eat one in it's just sort of whole state, but 393 00:24:36,480 --> 00:24:42,120 Speaker 1: you wouldn't have a very maybe like emotional experience with that, 394 00:24:42,880 --> 00:24:44,679 Speaker 1: and you could meet a lot of them. So the 395 00:24:44,720 --> 00:24:47,080 Speaker 1: way we get cocoa to be usable is we grind 396 00:24:47,119 --> 00:24:49,720 Speaker 1: it and it grind down. It's so so so fine 397 00:24:50,160 --> 00:24:52,800 Speaker 1: to such a small particle size that it turns into 398 00:24:52,920 --> 00:24:56,200 Speaker 1: almost a liquid. It's like a paste. And then from 399 00:24:56,240 --> 00:24:58,439 Speaker 1: that paste is where we can start to make all 400 00:24:58,720 --> 00:25:03,040 Speaker 1: chocolate and chocolate factionary kids. So grindings really refers to 401 00:25:03,160 --> 00:25:05,880 Speaker 1: that that step of grinding, the being down like very 402 00:25:05,880 --> 00:25:13,280 Speaker 1: literally and of course, like some symbolically, grindings is demand 403 00:25:13,640 --> 00:25:17,280 Speaker 1: because you wouldn't be grinding beings down at all if 404 00:25:17,280 --> 00:25:21,280 Speaker 1: people weren't demanding chocolate. Just clarifying, so what we would 405 00:25:21,280 --> 00:25:25,000 Speaker 1: we see the grinding data flashing through the terminal that 406 00:25:25,200 --> 00:25:29,840 Speaker 1: is a proxy for demand? Basically absolutely yes, because how 407 00:25:29,880 --> 00:25:33,520 Speaker 1: could you measure, right, You couldn't really measure everybody's demand 408 00:25:33,520 --> 00:25:36,560 Speaker 1: for chocolate, you know, we we have a vague idea 409 00:25:36,600 --> 00:25:39,480 Speaker 1: of it. But the way you measure it is by 410 00:25:39,680 --> 00:25:43,800 Speaker 1: how much the big processors and chocolmakers, how many how 411 00:25:43,880 --> 00:25:48,000 Speaker 1: much coco they're grinding, They're they're grinding based on their 412 00:25:48,040 --> 00:25:51,840 Speaker 1: own assessments of how much chocolate people are going to 413 00:25:52,000 --> 00:25:55,199 Speaker 1: buy from them. It's very hard for me not to 414 00:25:55,240 --> 00:25:59,240 Speaker 1: make a juvenile comment about grinding data flashing across the 415 00:25:59,240 --> 00:26:03,040 Speaker 1: Bloomberg term. Um, but I'm going to try just to 416 00:26:03,200 --> 00:26:07,200 Speaker 1: go back to the evolution of the market. Um, we're 417 00:26:07,240 --> 00:26:12,880 Speaker 1: talking about speculative forces. I seem to recall a trader, 418 00:26:13,040 --> 00:26:16,680 Speaker 1: a big commodities trader called Anthony ward Um, better known 419 00:26:16,720 --> 00:26:19,680 Speaker 1: as chalk Finger, and I think he said he was 420 00:26:19,720 --> 00:26:24,440 Speaker 1: gonna stop trading chocolate because, um, there was too much 421 00:26:24,880 --> 00:26:29,560 Speaker 1: algorithmic trading in the market, So commodities trading advisors for 422 00:26:29,600 --> 00:26:32,280 Speaker 1: instance c t a s coming into the market and 423 00:26:32,320 --> 00:26:34,600 Speaker 1: just changing the way it works. Is that something you've 424 00:26:34,640 --> 00:26:38,679 Speaker 1: observed as well, Christie, the algorithmic trading, Yeah, in the 425 00:26:38,680 --> 00:26:42,760 Speaker 1: futures market. Yeah. And I mean so I won't pretend 426 00:26:42,800 --> 00:26:48,840 Speaker 1: to be able to explain that aspect, but um there, 427 00:26:48,840 --> 00:26:51,040 Speaker 1: you know, I was actually just reading about it this morning. 428 00:26:51,480 --> 00:26:53,800 Speaker 1: I tried to read the Coco News every day, and 429 00:26:54,080 --> 00:26:56,359 Speaker 1: they're just there's actually a few articles out about this 430 00:26:56,440 --> 00:27:02,760 Speaker 1: algorithmic trading. Um. And yes it happens, and yes it 431 00:27:02,880 --> 00:27:09,520 Speaker 1: is computer programming making predictions, you know, and and taking 432 00:27:09,600 --> 00:27:14,120 Speaker 1: some of maybe the guessing away from human beings. Um. 433 00:27:14,160 --> 00:27:16,239 Speaker 1: And I think a couple of things about that, you know. 434 00:27:16,400 --> 00:27:20,359 Speaker 1: One is it further divorces people from you know, on 435 00:27:20,400 --> 00:27:23,480 Speaker 1: the trading side, the future trading side, from the experience 436 00:27:23,480 --> 00:27:25,879 Speaker 1: of cocal farming. I mean, they're already pretty far away 437 00:27:25,880 --> 00:27:30,080 Speaker 1: from it, but that that algorithmic training, you know, makes 438 00:27:30,119 --> 00:27:33,840 Speaker 1: it even that much more distant, and I think probably 439 00:27:33,920 --> 00:27:36,760 Speaker 1: much easier for people to forget them that they're talking 440 00:27:36,800 --> 00:27:41,760 Speaker 1: about real farmers, like real live human beings whose livelihood 441 00:27:41,800 --> 00:27:44,560 Speaker 1: depends on, you know, in some ways now what an 442 00:27:44,600 --> 00:27:48,920 Speaker 1: algorithm tells us um At the same time, those algorithms 443 00:27:48,960 --> 00:27:51,919 Speaker 1: are using the same data that we've always used, and 444 00:27:51,960 --> 00:27:55,359 Speaker 1: maybe the data is becoming more abundant, maybe it's becoming 445 00:27:55,400 --> 00:27:58,119 Speaker 1: more precise, you know, in terms of weather forecasting and 446 00:27:58,160 --> 00:28:01,680 Speaker 1: things like that, but it's it's still going to I 447 00:28:02,000 --> 00:28:04,959 Speaker 1: don't think there's been a fundamental change, you know, in 448 00:28:04,960 --> 00:28:08,320 Speaker 1: in how we predict what the price of coco is 449 00:28:08,320 --> 00:28:10,560 Speaker 1: going to do. I mean, there's lots of variables, but 450 00:28:10,600 --> 00:28:15,240 Speaker 1: there's only so many that that are really meaningful. So Christie, 451 00:28:15,359 --> 00:28:19,320 Speaker 1: before we wrap up here, what is the next big 452 00:28:19,359 --> 00:28:22,760 Speaker 1: thing that people in the coco market are thinking about 453 00:28:22,880 --> 00:28:25,800 Speaker 1: and watching for these days? The big word that we 454 00:28:25,880 --> 00:28:28,919 Speaker 1: hear about all the time in the cocoa industry and 455 00:28:28,960 --> 00:28:31,560 Speaker 1: have been for some time now is this is sustainability 456 00:28:31,680 --> 00:28:34,560 Speaker 1: and how sustainable is this crop? And there's lots of 457 00:28:34,600 --> 00:28:38,720 Speaker 1: ways to measure sustainability, but what the big companies have chosen. 458 00:28:38,880 --> 00:28:41,120 Speaker 1: These big companies that I was talking about, you know, 459 00:28:41,200 --> 00:28:45,080 Speaker 1: the five chocolate manufacturers and the three processors and other 460 00:28:45,400 --> 00:28:51,840 Speaker 1: large players, they're basing sustainability on on coco yields and 461 00:28:51,920 --> 00:28:54,840 Speaker 1: by yields, I mean how much fruit is any coco 462 00:28:54,920 --> 00:28:58,160 Speaker 1: tree growing, right, And so if your yields are increasing, 463 00:28:58,520 --> 00:29:01,040 Speaker 1: that means more pods on those trees and maybe more 464 00:29:01,120 --> 00:29:04,920 Speaker 1: beans inside those pods. Um and that is what the 465 00:29:04,960 --> 00:29:09,040 Speaker 1: big companies want. And so what we've seen recently, you know, 466 00:29:09,240 --> 00:29:11,640 Speaker 1: really recently in the last couple of weeks, but also 467 00:29:11,720 --> 00:29:14,320 Speaker 1: based on you know, conversations over the last few years, 468 00:29:14,480 --> 00:29:17,720 Speaker 1: is that for the big company's sustainability and cocoa really 469 00:29:17,720 --> 00:29:22,280 Speaker 1: means increasing yields. And that is hugely problematic from a 470 00:29:22,400 --> 00:29:25,640 Speaker 1: number of perspectives, but mainly from the perspective of a 471 00:29:25,640 --> 00:29:29,520 Speaker 1: cocoa farmer. And I'll just just really briefly describe what 472 00:29:29,720 --> 00:29:32,640 Speaker 1: that scenario would look like. And so there was a 473 00:29:32,640 --> 00:29:35,360 Speaker 1: big World Coco conference in Berlin a couple of weeks ago, 474 00:29:35,880 --> 00:29:38,760 Speaker 1: and one of the goals that came out of it 475 00:29:38,800 --> 00:29:43,440 Speaker 1: was to double yields. What that would if we doubled 476 00:29:43,640 --> 00:29:46,800 Speaker 1: the amount of cocoa being grown in the world, there 477 00:29:46,920 --> 00:29:49,960 Speaker 1: is only one price outcome, and that is a fall. 478 00:29:50,360 --> 00:29:54,520 Speaker 1: You know, there's no possible scenario where demand for chocolate 479 00:29:54,720 --> 00:29:59,280 Speaker 1: rises so much that it counteracts the um you know, 480 00:29:59,360 --> 00:30:02,880 Speaker 1: the price all that would come from doubling yields. And 481 00:30:02,920 --> 00:30:06,720 Speaker 1: so my question, really, you know, as we move forward 482 00:30:06,720 --> 00:30:09,600 Speaker 1: into this in in this conversation in the industry, is 483 00:30:09,640 --> 00:30:14,560 Speaker 1: how does doubling cocoa yields help a farmer if they 484 00:30:14,600 --> 00:30:17,040 Speaker 1: even if they grew twice as much cocoa, they would 485 00:30:17,080 --> 00:30:19,880 Speaker 1: be looking at a price that was a fraction of 486 00:30:19,920 --> 00:30:22,160 Speaker 1: the value of what it is now. And I just 487 00:30:22,240 --> 00:30:24,680 Speaker 1: don't think the math works. I don't think the math 488 00:30:24,760 --> 00:30:28,200 Speaker 1: of doubling how much cocoa you're growing works out to 489 00:30:28,280 --> 00:30:30,880 Speaker 1: a better income for a farmer if the price has 490 00:30:30,920 --> 00:30:35,239 Speaker 1: been utterly devastated by a superabundant supply. And so you know, 491 00:30:35,360 --> 00:30:37,000 Speaker 1: right now, I think we're in a moment in the 492 00:30:37,040 --> 00:30:40,720 Speaker 1: cocoa and chocolate industries really where people are just struggling 493 00:30:41,080 --> 00:30:46,240 Speaker 1: to come up with a solid, practical, you know, usable 494 00:30:46,280 --> 00:30:50,800 Speaker 1: definition of sustainability UM and so far, I don't think 495 00:30:51,160 --> 00:30:56,600 Speaker 1: increasing yields is our answer. So lots of work remaining 496 00:30:56,640 --> 00:30:59,840 Speaker 1: to be done on that question, for sure. Christie. One 497 00:31:00,200 --> 00:31:02,920 Speaker 1: question before you go, We've been building up to this 498 00:31:03,000 --> 00:31:10,280 Speaker 1: moment your favorite chocolate. I knew it was coming. I 499 00:31:10,280 --> 00:31:13,000 Speaker 1: will give you the real, honest answer, and so I 500 00:31:13,640 --> 00:31:16,760 Speaker 1: whatever chalcolout I'm eating in that moment. I love chocolate 501 00:31:16,880 --> 00:31:19,400 Speaker 1: so much. It has been my favorite food from my 502 00:31:19,480 --> 00:31:23,560 Speaker 1: whole entire life. And I don't even really care if 503 00:31:23,560 --> 00:31:26,280 Speaker 1: it's dark or mike or white, like I just I 504 00:31:26,360 --> 00:31:28,000 Speaker 1: eat it every day. And so I'll tell you what 505 00:31:28,040 --> 00:31:30,840 Speaker 1: I ate today. There's a new company and gone It's 506 00:31:30,880 --> 00:31:34,120 Speaker 1: called Niche, and I ate some of their thirty percent 507 00:31:34,280 --> 00:31:36,920 Speaker 1: milk chocolate. And that was my favorite today because I 508 00:31:36,920 --> 00:31:41,800 Speaker 1: eat it today, so tomorrow it might be a different one. Christie, 509 00:31:41,880 --> 00:31:45,360 Speaker 1: this is a fascinating conversation and I already can't wait 510 00:31:45,400 --> 00:31:47,680 Speaker 1: to have you back again on the podcast, maybe in 511 00:31:47,760 --> 00:31:50,960 Speaker 1: a couple of years as we see the evolution of 512 00:31:51,560 --> 00:31:54,840 Speaker 1: uh these yields. Thank you so much for joining. Oh 513 00:31:54,880 --> 00:31:56,400 Speaker 1: it was a lot of fun to talk. Thank you 514 00:31:56,480 --> 00:32:10,720 Speaker 1: so much, Tracy. What is your favorite kind of chocolate? Oh? 515 00:32:10,880 --> 00:32:12,400 Speaker 1: Do you really want to know, Joe, because I'm going 516 00:32:12,440 --> 00:32:14,400 Speaker 1: to give you like a massive list. No, I do, 517 00:32:14,520 --> 00:32:17,880 Speaker 1: I did? Ready? Yeah. I like green and blacks, I 518 00:32:17,920 --> 00:32:22,440 Speaker 1: like milka. I like anything from Jack Torres in New York. 519 00:32:22,680 --> 00:32:24,840 Speaker 1: There's one close to the Bloomberg office, so you know, 520 00:32:24,920 --> 00:32:26,560 Speaker 1: if you're looking for a present for me, you can 521 00:32:26,560 --> 00:32:31,440 Speaker 1: go there. I like toisture in Switzerland. I like Mozart 522 00:32:31,480 --> 00:32:34,800 Speaker 1: coogl in Austria. I can keep going, by the way, 523 00:32:34,840 --> 00:32:38,200 Speaker 1: but I better stop. This is amazing. I had no 524 00:32:38,240 --> 00:32:40,160 Speaker 1: I mean, I I guess I think I knew that 525 00:32:40,200 --> 00:32:42,120 Speaker 1: you like chocolate. I didn't realize you liked it with 526 00:32:42,440 --> 00:32:46,240 Speaker 1: this degree of specificity and granularity. I think about it 527 00:32:46,280 --> 00:32:51,160 Speaker 1: a lot. M As for my own personal chase, I 528 00:32:51,160 --> 00:32:54,120 Speaker 1: don't really eat chocolate that much, but for me, the 529 00:32:54,200 --> 00:32:56,640 Speaker 1: darker is better. At see, I was gonna ask, but 530 00:32:56,720 --> 00:32:58,680 Speaker 1: I knew you would say that. Wait, so what do 531 00:32:58,720 --> 00:33:01,560 Speaker 1: you think The darker the better? Darker the better. Okay, 532 00:33:01,560 --> 00:33:04,760 Speaker 1: I'll remember that. I'll bring you some from the next 533 00:33:04,920 --> 00:33:10,480 Speaker 1: chocolate friendly destination I go. Please do. But seriously, I 534 00:33:10,520 --> 00:33:14,880 Speaker 1: found that conversation fascinating. And you're right. The chocolate market 535 00:33:15,040 --> 00:33:18,360 Speaker 1: is defined by some very very specific factors like the 536 00:33:18,400 --> 00:33:21,160 Speaker 1: weather and a few big buyers in the form of 537 00:33:21,160 --> 00:33:24,720 Speaker 1: the chocolate companies. But it's also a really interesting structure 538 00:33:24,800 --> 00:33:28,800 Speaker 1: with this network of mostly independent farmers and the way 539 00:33:28,800 --> 00:33:31,920 Speaker 1: that interacts with the futures market. Yeah. Absolutely, that's what. 540 00:33:32,160 --> 00:33:34,280 Speaker 1: Uh you know, It's as I was kind of getting 541 00:33:34,320 --> 00:33:38,280 Speaker 1: at the beginning to some extent, all commodities to get 542 00:33:38,320 --> 00:33:41,000 Speaker 1: reduced to some price that we could chart on his screen. 543 00:33:41,440 --> 00:33:45,120 Speaker 1: But the origin of those prices is different for all 544 00:33:45,160 --> 00:33:50,560 Speaker 1: of them. So you might have very industrialized commodities, but 545 00:33:50,600 --> 00:33:53,360 Speaker 1: then other ones where you have someone on a phone 546 00:33:53,400 --> 00:33:57,560 Speaker 1: calling up local sources asking them what their latest price was, 547 00:33:58,080 --> 00:34:01,680 Speaker 1: or in this case, a network of five million cocoa 548 00:34:01,720 --> 00:34:05,000 Speaker 1: farmers around the world with the prices said at local 549 00:34:05,080 --> 00:34:08,959 Speaker 1: gates or local markets. So I love learning about the 550 00:34:09,000 --> 00:34:12,920 Speaker 1: actual derivation of these, uh, these prices that we take 551 00:34:12,960 --> 00:34:16,319 Speaker 1: for granted. Yes, and I have a newfound appreciation for 552 00:34:16,360 --> 00:34:23,000 Speaker 1: the grinding reports can't say with a straight pain. Sorry, 553 00:34:23,480 --> 00:34:26,480 Speaker 1: let's leave it there. This has been another edition of 554 00:34:26,560 --> 00:34:29,320 Speaker 1: the ad Thoughts podcast. I'm Tracy Alloway. You can follow 555 00:34:29,360 --> 00:34:32,239 Speaker 1: me on Twitter at Tracy Alloway and I'm Joe Why 556 00:34:32,280 --> 00:34:35,400 Speaker 1: Isn't All? You can follow me on Twitter at the Stalwart, 557 00:34:35,800 --> 00:34:40,040 Speaker 1: and you could follow Christie on Twitter at doc of 558 00:34:40,320 --> 00:34:44,760 Speaker 1: Chalk really Enough, And you should follow our producer tofur 559 00:34:44,840 --> 00:34:48,480 Speaker 1: Foreheads at foreheads t, as well as the Bloomberg head 560 00:34:48,520 --> 00:34:53,680 Speaker 1: of podcast, Francesca Levy at Francesca Today. Thanks for listening. 561 00:35:01,280 --> 00:35:01,320 Speaker 1: O