The cocoa supply chain

Farmer, then a local buyer or a cooperative, then an exporter, then in some countries a state marketing board, then a shipper, then a grinder or processor, then a chocolate manufacturer, then a brand, then a retailer.

The grinder is the party most people have never heard of and the one that matters most. Grinding — turning beans into mass, butter and powder — is concentrated among a small number of very large companies, and it is the point at which beans from many origins are blended and lose their individual identity. Once cocoa has been ground, the trail back to a farm is generally gone.

Cocoa is priced on the London and New York futures exchanges. Large manufacturers hedge and buy forward, which means a price movement reaches their products slowly and partially. Farmers are least protected, because the farmgate price is set below the exchange price and does not track it closely upward.

Grinding figures — the volume of beans processed — are watched as the demand indicator, and the ratio between cocoa butter and cocoa powder prices determines whether processing beans is profitable at all. When butter is expensive relative to powder, manufacturers substitute where the law allows, which is the mechanism by which an exchange movement reaches a wrapper.

Aggregation is the answer. Beans from thousands of smallholdings are pooled at buying stations, blended again at export, and blended a third time at grinding. Each step is economically rational and each destroys information.

Single-origin, single-estate and micro-lot products are the exceptions, and they are exceptions because keeping a lot separate through that chain costs money at every step. That is what a traceability claim is actually buying, and it is why the specific claims — named farm, harvest year, lot separation — are the ones worth anything.