Ecuador benefits from cocoa prices, but its ‘boom’ attracts organized crime

The 41-year-old woman, wearing glasses, a hat and holding pruning shears, was visiting a farm full of cocoa trees in Buenafe, Los Rios province.

In the middle of the crop, he cuts one of the fruits in half until he has removed the sticky grains, which give off a sweet aroma.

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There has been no brakes on pricing for these seeds since 2023, breaking $10,000 per ton for the first time in New York in March.

This is due in particular to strong global demand and a significant reduction in supply from West Africa.

In Ecuador, where the government does not regulate cocoa prices, profits are increasing.

This year, Avellán managed to sell a quintal (100 pounds) for $420. Before the boom, “prices of $50 to $60 were not justifiable (for investment), they made you not want to be a cocoa farmer anymore,” the farmer told AFP.

Now, “thanks to these prices we will make our family more sustainable, we will have better conditions and (…) more reason to take care of our plants because now (cocoa) is a seed of gold,” celebrated the producer, who inherited this profession from her grandparents.

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“historical”

“These prices are historic, we have never had prices like these,” said Iván Ontaneda, president of Ecuador’s National Association of Cocoa Exporters (Anecacao).

In Ecuador, small growers produce 80% of the total fruit production in 22 of the 24 provinces. The rest is done in medium and large plantations.

The grain dries in the equatorial sun at storage centers, and millions of brown seeds are packed into bags to the delight of the world.

Ecuador is the world’s third-largest producer after Ivory Coast and Ghana, producing about 420,000 tonnes a year. But extreme weather changes and plant diseases have devastated crops in Africa in recent months, tipping the fiscal balance in favor of the South American country.

Almost all production is exported: cocoa generated $1.323 billion in 2023. According to the Central Bank, the country sold $774 million between January and April 2024, due to high international prices.

Its main markets are Indonesia, Malaysia, the United States, the Netherlands and Belgium.

Kidnapping and extortion

For cocoa farmers, Prosperity It is shrouded in a phenomenon that has nothing to do with agricultural work: criminal violence.

Los Rios is one of Ecuador’s most volatile provinces, with a higher homicide rate (111 per 100,000 residents) than Guayas (86), and its capital, the dangerous commercial port of Guayaquil, a major outlet for drugs bound for the United States and Europe.

“My colleagues were kidnapped. Not long ago, not even eight days ago, they kidnapped a young man… They stole the car (truck full of cocoa) from the company,” Avilan said.

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Marco Landívar, manager of the processing plant at exporter Eco-kakao, told AFP that threats from criminals mean “increased costs” for the cocoa chain. “The shipments have to be carried out by private security and all transports to the ports have double supervision,” he added.

Ontaneda noted that exporters spent about $20 million on security in 2023. The alliance is concerned that criminals will contaminate their shipments with cocaine.

“Blood for Sharks”

The leader also recognized that the high and volatile price of cocoa on the stock exchange, due to speculation, creates “concerns and problems for other players in the sector (…)”.

“This is the blood of the sharks of these financial institutions,” he explained. “Speculative money comes into the market to buy paper cocoa,” or the amount of cocoa that is waiting to be harvested, and the price goes through the roof.

For example, in Ecuador, there were breaches of pre-signed contracts as producers and intermediaries did not supply exporters.

“The unexpected increase in prices requires more liquidity, which the export sector does not currently have. The quadrupling of cocoa prices has consequences for the world industry, grinding, demand and ultimately for chocolate consumption,” for the main derivative cocoa.

Representatives of Anecacao and other international analysts have warned that chocolate consumption will fall sharply due to costs.