New cocoa disease in Brazil leads to debate on new production in Pará state

RIO DE JANEIRO, BRAZIL – In addition to health controls by the Sanitary Defense Secretariat (SDE), regarded as not very complex, the Cocoa Farming Plan Executive Committee (CEPLAC) believes that one of the ways to mitigate the spread of the monilia pod rot disease to Bahia is to increase the level of industrialization in Pará, the state that shares the leadership in cultivation, according to the IBGE (Brazilian Institute of Geography and Statistics).

While preventing occurrences such as these in border areas from having to travel across the country for the beans to be processed in Bahia – and not spreading the disease -, CEPLAC’s director Waldeck Araújo envisions a new process for production gain.

The three large multinationals that predominantly process cocoa, Cargill, Olam and Barry Callebaut, have more recently been joined by Gencau, a processor in Pará, albeit with a still limited capacity of 18,000 tons a year. The more buyers, the greater the incentive to producers.

Abandoned or poorly cared for plantations, which are still found in Bahia, are another point that must be tackled. And in this case it is not only the disease detected in the North, but the dreaded witches’ broom, still uncontrolled and responsible for the debacle of the crop in Brazil.

For Araújo, by preventing these potential sources of pests from spreading, with the resumption of proper management, production will also increase again and Brazil may reach an annual output of over 60,000 to 70,000 tons by 2025, the Ministry of Agriculture, Livestock and Supply’s target. In addition to more resistant cultivars that CEPLAC and its partners are developing.

It rains too much in Bahia, so any disease is more difficult to fight there.

In 2021, it should produce between 200,000 and 210,000 tons, figures subject to debate because there is a discrepancy between the IBGE and the sector’s data. From the world’s top producer, Brazilian producers are currently in 7th place.

If new production boosts are established, another reflection on the market is a lower dependence on imports. On average, those three companies import approximately 60,000 tons a year under the drawback regime, when the raw material for the manufacture of exported goods is tax-exempt.

The pandemic led to a loss in exports in 2020, against the 50,700 tons processed (cocoa powder, butter or paste) in 2019. Raw or roasted cocoa has a marginal share.

Prices

The 2020 consumption drop is recovering, albeit not at the required strength, which Mercado do Cacau’s analyst Adilson Reis believes should occur at the end of the year in Europe and the United States.

Thus, not only are international prices depressed – around US$2,410/t, for September, and US$2,480/t for December, stable on Monday, August 9 – but also premiums. Reis expects the premium over New York to reach US$100, when until April it stood at US$800.

Oversupply against low consumption is the cause.

In nominal terms in the domestic market, this represented R$270 between April and May and has now dropped to R$195, explains Adilson Reis, who is also a market operator.

Production should be higher this year, including the recently completed seasonal harvest in Bahia, at 75,000 tons, but production costs have increased, he adds.