Introduction
A commodity refers to any raw material sold and bought at a price determined by the prevailing market prices. Agricultural products and minerals clearly exemplify different commodities. Since a commodity exchange hands through trade, it implies that it has value. A commodity's value depends on divergent factors including quality, market forces, and competition among others. The aspect of a commodity having a value has facilitated the existence of trade all over the world through centuries. Since different commodities prosper in distinct locations globally, humanity embraced trade seeking to distribute scarce products in line with prevailing demand (Oni 2). The uneven distribution of the commodities plays a focal role in fostering demand. In line with market dynamics, when the demand rises, supply has to increase. Similarly, when supply increases, price decreases, as demand reduces. The cost incurred during supply in an attempt to satisfy demand for a commodity is always commensurate with the value of that commodity and the total cost of delivery.
Cocoa is one of the most highly demanded and supplied product across the world. Over the years, producers have sought to refine Cocoa seeking to attain formidable value addition. Chocolate is one of the widely consumed outputs allied to the cocoa commodity. According to 2015 statistics, Peru was among the significant cocoa producers in the world. Peru uses over 60,000 hectares of land plant cocoa in an attempt to satisfy the ever-increasing global demand. The increase in demand for cocoa has fostered notable changes in commodity's production in the recent years (Potts, Jessica, and Jaclyn n. p). For instance, the increased demand has played a pivotal role in expanding the producers' capacity. In the past few centuries, only American states remain as principal producers of cocoa. However, the current production and supply of Cocoa extend to as far as Africa. Despite economic and climatic challenges facing numerous countries, some states have tried to participate in the provision of cocoa, as the chart below delineates.
Currently, Europe is the main Cocoa producing continent around the world. The continent avails over 39%, Asia and America yield 21%, while Africa produces 19% of the total global cocoa production.
Production Efficiency
The increased demand for cocoa encourages African farmers to enhance their respective production capacities. Although the continent holds the last position of the world's biggest cocoa producers, it hosts the highest cocoa producing country, Cote de Ivore. The global demand for cocoa is growing. Assuming an annual growth in demand by 2%, the world will require over a million more metric tons to meet the prevailing cocoa demand in the next four years. The declining productivity of the cocoa trees as they age is an imperative hindrance to this objective. While cocoa-producing countries in Africa have vast land to grow the crop, they suffer from obsolete production techniques. While their counterparts in the developed nations have limited space, mechanization has played a focal role in improving the quality of their yield.
Price Fluctuations
The change in global demand for cocoa has significantly influenced its prices. Financial experts infer that competition, the stock ratio, global food prices, and fragmentation in cocoa processing industries imperatively affect cocoa prices. Over the past five years, the price of cocoa has increased. Between 2008 and 2011, the price of cocoa spiked to a 30-year high of $3,625 per ton in 2010. It later dropped to $2,200 per ton. While the prices traverse the global spectrum, African countries suffer a great deal from such changes. Since African countries over rely on exports, they rarely focus on value addition; hence, price fluctuations direly affect their returns. Price changes and oscillations in the cocoa market emanates from several factors such as delay in delivery of the commodity to the ports, extreme weather conditions such as intense rains, and low stockpiles in the market.
Policies to Level the Global Cocoa Market
The challenges faced in the cocoa industry played a focal role in harnessing the formation of International Cocoa Organization (ICCO). The organization oversees challenges that the cocoa producing countries face and seeks to regulate the behavior of the producing countries. The two notable breakthroughs ICCO has achieved include establishing an explicit rule for creating a Sustainable World Cocoa Economy and unveiling a Consultative Board (Ruf 384). The consultative board acts in an advisory capacity while the organization makes final decisions. The organization has helped transform the market structure of cocoa in the world. Since its formation, the International Cocoa Organization has entrenched transparency in the global cocoa market. The move has momentously helped African cocoa producing nations curb tremendous losses previously incurred. The organization has achieved this objective through price control, optimizing decisions by all market participants as well as improving and helping small-scale cocoa producers get more income.
Since its formation, ICCO has been disseminating global statistics on the current state of the cocoa market. ICCO functions as a center for solving all issues regarding the global cocoa market economy. The organization achieves this initiative by collaborating with governments in the cocoa producing countries as well as the private sector. In the recent past, the organization has been actively involved in ensuring the African countries manage to add value to their products, seeking to fetch better prices. In future, ICCO should ensure that African countries receive high-end technology, equipment, as well as efficient production mechanisms. Through such initiatives, the institution will level the cocoa market safeguarding the less developed countries from unfair treatment in the global market
Works Cited
Oni, To. "The Potentials of and Constraints to Diversification of Cocoa to Agro-industry in Nigeria." Bowen Journal of Agriculture 2.2 (2008). Web.
Potts, Jason, Jessica Van Der Meer, and Jaclyn Daitchman. The State of Sustainability Initiatives Review 2010: Sustainability and Transparency. Winnipeg: International Institute for Sustainable Development, 2010. Print.
Ruf, François Olivier. "The Myth of Complex Cocoa Agro forests: The Case of Ghana." Hum Ecol Human Ecology 39.3 (2011): 373-388. Web.