The Journal. - Will Tracking Cocoa Beans Help Save The Rainforest?

Episode Date: August 9, 2024

The world’s rainforests have shrunk dramatically in recent decades due to the expansion of land for growing cash crops, like cocoa. The European Union is trying to limit destruction with a new law which aims to track where cocoa is grown. Farmers who want to sell to Europe— the world’s largest cocoa market— are racing to meet the law's requirements, or lose out. WSJ’s Alexandra Wexler details how the law will impact millions of cocoa farmers in West Africa. Further Reading: - Chocolate Prices Have Soared. A New Law Threatens to Keep Them High.  - Your Sweet Tooth Is Getting Expensive  Further Listening: - How Indonesia Tamed Rainforest Destruction  Learn more about your ad choices. Visit megaphone.fm/adchoices

Do you have a favorite kind of chocolate? You like a Hershey Kiss person or like a dark chocolate bar? Yeah, no, definitely not a Hershey Kiss fan. Wait, hold on a second. Sorry. I don't want to start with you. You're not a Hershey Kiss fan? I am not a Hershey Kiss or Hershey bar fan. I love chocolate, but I don't know as much about it as our colleague Alexandra Wexler.

She's written a lot about chocolate over the years. What is not to like about Hershey Kisses? So they actually use relatively little cocoa in Hershey's chocolate compared to other types of maybe more artisanal and not even artisan, like those sort of like 70% cocoa bars you can find in like a grocery store in the US uses a lot more actual cocoa. Chocolate is delicious, but growing cocoa, the main ingredient in chocolate, can have a damaging impact on the planet.

Most of the world's cocoa beans come from West Africa. And over the last several decades, millions of acres of rainforests have been cut down to make room for cocoa farms. Now, a new law requires cocoa growers to map their farms to prove their cocoa wasn't grown on deforested land. How big of an undertaking is this to map all the cocoa farms in the world, actually? It's pretty massive. It's definitely millions, at least even in just West Africa, of small farms. Wow.

Millions of farms that have to be mapped? Millions of farms that have to be mapped. And they're not all in the same place and a lot of them are hard to get to. A lot of them are kind of only accessible by foot. Welcome to The Journal, our show about money, business and power. I'm Ryan Knudsen. It's Friday, August 9th. Coming up on the show, how a new law is impacting cocoa farmers in West Africa. Make your nights unforgettable with American Express. Unmissable show coming up? Good news.

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Benefits vary by card, other conditions apply. Earlier this year, Alexandra went to visit some cocoa farms in Ivory Coast in West Africa. The country is the biggest producer of cocoa beans in the world. We are walking along a little dirt path. It's very green, very much a rainforest, jungle environment. Lots of birds tweeting. Can you describe what a cocoa farm looks like? Cocoa farms, they're generally have few other plants on the ground. They're generally quite tidy and the trees are really, really quite unique.

They're small, not too tall, and they're quite twisty, the trunks and the branches, and they have these giant cocoa pods hanging off of them. When they're ready to be harvested they can be like up to a foot long. And they almost look like a squash or something like that, like, or like an elongated pumpkin. Yeah, they do look a bit like a squash. They actually, I describe it as just like when you see these trees just like dripping with these pods, like green and yellow pods, it almost looks like an alien tree. Like it looks like it's from some other planet.

It's totally wacky and wild looking. Definitely not something you see in the US. This might be a dumb question, but how do you turn the cocoa plant into a chocolate bar? Yeah, no, there are no such thing as dumb questions. Thank you. So basically the pods are harvested.

They're cracked open inside our cocoa beans. I've actually tasted the kind of pulp inside of the pod on a previous trip to West Africa. It does not taste like chocolate. Does it taste good? Not really, no. inside of the pot on a previous trip to West Africa. It does not taste like chocolate. Um... Does it taste good? Not really, no. Farmers then take the beans they've harvested and dry them in the sun.

Sometimes it's on tarps on the ground, which is apparently not the best way to do it. Other times it's kind of elevated on like chicken wire, which apparently is better, I guess, the ventilation. And then once they're dried, they're packed into sacks. And those sacks are then taken to the ports for export. Those cocoa beans are sent all over the world to processors that turn it mainly into cocoa powder and cocoa butter, the two key ingredients in chocolate.

The butter gives it kind of, they call it a mouth feel, kind of like that smooth, like gives it kind of, they call it a mouth feel, kind of like that smooth, like buttery mouth feel that like a nice bar of chocolate will have. And then cocoa powder is used in things like cakes and cookies and other chocolate products. As demand has grown to meet the world's sweet tooth, cocoa farmers have expanded their production, often by cutting down forests to plant more cocoa trees.

Cocoa generally leads to quite a bit of deforestation. And in Ivory Coast, which is the world's biggest producer, obviously there's a lot of land dedicated to cocoa, is one of the highest rates of deforestation among countries over the last 60 or so years. It's lost about 90% of its forest cover. Not all that deforestation is from cocoa farms, of course, but Alexandra says it plays a major role. When forests disappear, it can have a huge impact on the climate, because plants and

trees absorb a lot of carbon dioxide, a greenhouse gas that's a leading contributor to climate change. The biggest buyer of cocoa beans in the world is Europe. Europeans love chocolate. And lawmakers there started getting worried about the environmental impacts of their chocolate habit. So, in 2023, the European Union passed a law to tackle this. It requires farmers to plot the precise location of their farms to prove the beans aren't

being grown on land that's been deforested since 2020. What's the story behind how this European Union law came about? So it's a law that's meant to combat deforestation across the globe. It's not just cocoa, handful of other commodities, coffee, palm oil, cattle are also affected. And basically the EU wants to be able to trace those commodities back to their farm that they originate from in order to make sure that they haven't been grown on land that's been deforested, basically to prevent any further deforestation. And it's aimed at climate change

and kind of protecting the forest that we do have left. So this law basically says that if you want to sell chocolate in the European Union, in European grocery stores or on shelves, you have to demonstrate that it's not grown on a piece of land that was recently deforested. Correct. was recently deforested? Correct. While this law comes from Europe, it doesn't really impact farmers there because cocoa isn't really grown in Europe.

The law will mostly affect growers in West Africa and South America. So it's sort of like the European Union is setting a law that then other countries have to comply with. If they want to sell to the European Union, yes. So obviously the European Union can't tell them they have to do this. But if they want to sell to Europe and Europe is the world's biggest chocolate market, they import more than half of the world's cocoa beans. So you want to have access to that market if you can. So how is this law going to work?

That's after the break. In places like Ivory Coast, complying with this new European Union law is proving to be a bit of a challenge. Mainly because there are so many cocoa farms. The country has more than 1.5 million of them. The cocoa farms, they're generally quite small. They're five acres or smaller, generally like mom and pop kind of enterprises. And so the idea that as part of this law, you have to GPS map your cocoa farm, I found that fascinating.

And I was wondering how they were going to accomplish this with literally millions of these really smallholder farms across Ivory Coast and the rest of West Africa. Ivory Coast's cocoa and coffee regulator said that as of May, it had mapped just over 80% of the country's farms. But in order to plot the rest by the start of the cocoa season, which begins October 1st, they'd have to be mapping 2,000 a day. The main issue is just the number of farms, the sheer number of farms that have to be mapping 2,000 a day. The main issue is just the number of farms, the sheer number of farms that have to be mapped

and limits on the number of people who can be deployed to just go map cocoa farms all day. What does it actually take to map a farm? It's super easy once you're there. You basically just need a smartphone. There's an app, I think there are several apps that you can use to just get the GPS coordinates of where you're standing. And that's pretty much it.

The problem, though, is that most cocoa farmers don't have smartphones. Maybe 50% of these farmers are kind of living below the extreme poverty line, which is like a couple of dollars a day. And a smartphone, say even like the cheapest smartphone you can get maybe from China is like $20. If you're feeding a family with like seven children, grandparents, the smartphone's still a little bit out of reach. One way growers get access to smartphones is through the farming cooperatives that many of them belong to. A cooperative might have a single cell phone

that it shares among thousands of farmers. Alexandra saw the mapping process at one farm herself. We're walking through the cocoa farm now to the center so that we can get the GPS coordinate readings from the middle of the farm. So we waited to come into a bit of a clearing and he opened this mapping app and he lifted his phone sort of into the air to get some signal and then recorded the coordinates of where this farm was.

What will happen if this law goes into effect, this deadline passes, and some of these farms still aren't mapped? They won't be able to sell to the EU, essentially, which is a problem because it's the largest market, also the closest market to Ivory Coast. And yeah, it could create issues. Also, if middlemen purchase the beans and just, you know, maybe say make-up coordinates, it's going

to cause a huge due diligence problem for the European Union. And purchasers of cocoa beans are going to want to be super careful to be compliant. So yeah, it might cause a lot of complication. Europe's law takes effect at a time when chocolate is already unusually expensive. West Africa has been experiencing extreme weather and cocoa tree diseases. Stockpiles of cocoa this year are expected to be the lowest in 45 years. Chocolate prices are already sky high. They're about four times higher than they were a year ago, which is an unbelievable increase. And this law is just going to support these higher

prices and keep them higher for longer, essentially. It's certainly not going to do anything to help bring them down in the near term. This law doesn't sound like that difficult to comply with. You just got to get the GPS coordinates on there. It's not like the farms have to like add staff or other things to their process. So why will it result in higher chocolate prices? So in theory, it will likely take beans off of the market as farms still sort of lag behind with compliance. So with there already being massive shortages of cocoa beans, any further

beans taken off of the market are only going to support these high prices. And how will the European Union enforce this law? So they've said that they'll enforce it with satellite imagery. I think obviously sort of, you know, comparing like before and after pictures, so pictures around the end of 2020 to now to see has this particular forest been encroached upon? Is there less of it than there used to be? And yeah, and they said they would also potentially put some boots on the ground to inspect. I think there are a few other things that they have in mind,

but it's going to be very difficult. It's a huge area to cover. So it's going to require a lot of manpower, I would think. So does it seem at least at this point that this law will ultimately do what it's set out to do? I hope so. I mean, I think fighting deforestation is a good thing. And I think that the countries do want to generally comply with this law because they also would like to limit deforestation further within their borders. So hopefully it works out. I think the only losers in this, at least in the short term, are going to be the chocolate lovers. That's all for today. Friday, August 9th.

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