Interesting Facts About the Cocoa Market

A recent piece in the Financial Times by Susannah Savage titled Chocolate Cartels: The Rise of Cocoa Smuggling (August 2, 2025) sheds light on several critical issues surrounding the cocoa bean trade, the lifeblood of chocolate.

The Cocoa Conundrum: Deals and Disparities

First and foremost, the agreements between Ghana and Ivory Coast—two countries producing two-thirds of the world’s cocoa beans—are worthy of scrutiny. Officially, these deals were designed to shield farmers from the whims of global market price fluctuations. However, the underlying motivation likely aimed to create a domestic monopsony, allowing the states to pay farmers less than the world price while pocketing the difference when reselling on the international market. As cocoa prices soared to $10,000 per ton before settling at around $7,000, farmers have seen their compensation lag behind, only rising from $1,000 to between $3,000 and $5,000.

Economists would not find this surprising. In wealthier nations, farmers constitute a negligible slice of the population yet wield significant influence, often manipulating state mechanisms to their advantage. Conversely, in countries like Ghana and Ivory Coast, farmers represent the majority of the working populace but are routinely exploited by the concentrated interests of urban elites and government officials. Public choice theory reiterates that we should be cautious in idealizing government; it’s staffed by individuals as self-interested as any private citizen. Politicians, in turn, often find it expedient to cater to organized interests, reinforcing existing inequities.

The Smuggling Surge: A Risky Business

Adding another layer to this intricate tapestry is the surge in cocoa smuggling. With lucrative prices on the world market, many farmers divert a portion of their crops—potentially up to 25% in Ghana—to smugglers. These smugglers, despite facing significant risks, transport the beans across borders to evade the domestic monopsony and resell them for as much as $9,000 per ton. The journey often culminates in European processing hubs, notably in Belgium and the Netherlands. Capturing the essence of this phenomenon, one anonymous pilot, who advises the government, remarked, “It’s more dangerous to investigate cocoa than arms trafficking,” likening it to the perilous drug trade in Colombia.

“It’s more dangerous to investigate cocoa than arms trafficking,” boasted the pilot, an adviser to the government, who requested anonymity and described it being “like cocaine in Colombia or in the Amazon.”

The Smuggler’s Dilemma: A Question of Justice

In the words of Adam Smith, the smuggler is often a figure caught between legal transgression and natural justice. He posits that while smuggling is technically a crime against the state, the motivations driving individuals to break these laws can be deeply rooted in economic necessity. Many people find it difficult to maintain scruples about purchasing smuggled goods when they are presented with clear benefits, which raises the question: are we not merely exposing the hypocrisy of a system that criminalizes actions driven by survival?

Adam Smith saw the smuggler as a person who, though no doubt highly blameable for violating the laws of his country, is frequently incapable of violating those of natural justice, and would have been, in every respect, an excellent citizen, had not the laws of his country made that a crime which nature never meant to be so.

The Corruption Conundrum: Bribes and Bureaucracy

Nevertheless, the narrative grows murkier with the involvement of official corruption. Reports from the FT highlight government officials accepting bribes from smugglers. This corruption, while ethically dubious, inadvertently facilitates trade for smallholders who might otherwise be stifled by bureaucratic constraints. As noted, “Ivorian authorities did not respond to a request for comments,” leaving a cloud of ambiguity over the situation.

New Regulations: A Double-Edged Sword

Lastly, the introduction of the European Union’s Deforestation Regulation, mandating product traceability, poses a significant threat to the smuggled cocoa trade. Without proper documentation, smuggled beans may become unsellable under this new framework, potentially driving prices further down. However, if smugglers find ways to circumvent these regulations, the prices they can offer farmers will likely diminish, creating a challenging paradox for those in the industry.

In conclusion, the cocoa bean trade illustrates the complexities of economic systems, where even well-intentioned policies can lead to unintended consequences. As Ghana and Ivory Coast grapple with the realities of monopsonies, smuggling, and corruption, the future of their cocoa farmers remains precarious, highlighting the urgent need for a more equitable approach to agricultural policy.