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Is growing cocoa in India a profitable business?

by Dr Prem Community Writer
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India is known for its coffee and tea plantations, but cocoa as of now is produced in very small quantities. Statistics show that India produces about 1% of the cocoa produced in Ivory Coast, which is the biggest producer of cocoa in the world. When it comes to cocoa, the world is interested in quality rather than quantity, so India can still become one of the major producers if it starts producing good quality cocoa. As of now, cocoa is grown in Kerala, Karnataka and Andhra Pradesh, but it is being grown in some other parts of India too. The question is whether growing cocoa in India will be profitable for farmers. Let’s take a look:

Growing cocoa in India: profitable or not

Growing cocoa in IndiaCacao or cocoa cultivation was first started in India in 1798, in Tamil Nadu. After the British rule ended in India, the Cadbury Company started cocoa production in India, but the Indian cacao was hybridized into a product which could resist diseases and had high yields. Now, the cocoa cultivation in Kerala is the largest in the country, with a few other Southern states following.

Cocoa cultivation has been started in Nagaland and Assam as well, but as an intercrop.

Indian farmers should focus on quality

Growing cocoa in India has not been a highly profitable business for farmers, especially small farmers. This is due to the fluctuating prices of cocoa in India. The growing demand for good quality cocoa worldwide is an opportunity for farmers to venture new markets, which could be lucrative for them.

Till now, the best states in India, which produce cocoa at the moment, are Kerala, Andhra Pradesh, Karnataka and Tamil Nadu. Indian cocoa beans are considered to be among the best in the world. The Swiss are noticing the fact, and at least one company has started to import cocoa from India.

The brand Chocolat Stella (Stella Bernrain) produces exclusive chocolates made from single –origin chocolate. These exclusive chocolates are made out of cocoa which is harvested from a single country. Along with chocolates from Equador, Trinidad, Madagascar and Costa Rica, now there is a new flavour in dark chocolate called the ‘India Noir 72%’. The chocolate is targeted at Europeans who are fascinated with India.

This goes to prove that good quality cocoa is appreciated worldwide, and there is a market for it already.  Thus, growing cocoa in India can turn out to be financially viable for Indian farmers.

Why is there low production of cocoa in India

Growing cocoa in IndiaCocoa has been produced in India for about half a century. Still, apart from the cocoa cultivation in Kerala, the crop has still to pick up in the rest of the country. Cadbury, which started cocoa production in India, sources about a third of its requirement from India. It means that though cocoa production has increased significantly in India, it still is not enough to meet the demand.

Even though there is a high demand for cocoa worldwide, Indian farmers do not seem to have enough incentive to step up production. Cocoa is grown as an intercrop, along with coconut, arecanut, coffee and rubber. The other crops provide a stable income to the farmers and cocoa crops are often uprooted to make way for cash crops such as rubber, which fetches higher prices. Cocoa prices have steep highs and lows, depending on the weather, which discourages farmers from taking up the crop seriously.

The weather plays a role

Even in the best states such as Kerala, Andhra Pradesh and Karnataka, it is difficult to grow cocoa which meets international standards. This is because the harvesting time of cocoa beans in India is rainy season, when the moisture content of the beans also increases. The farmers get lower prices for the cocoa, as price depends on dry bean content.

Another obstacle to growing cocoa in India is that in rainy season, the beans receive less sunlight, and cannot be dried, which makes them prone to mould. Buyers reject these beans which lead to a loss for the farmers. The demand for cocoa domestically is less as the yield is unpredictable, which again discourages farmers from cultivating it.

Multi-national investment

Growing cocoa in IndiaAs mentioned before, growing cocoa in India as a profitable crop is possible when inter-cropping is done scientifically. According to some calculations, a farmer can earn up to Rs 60,000 per acre of land along with coconut, from which he can earn Rs. 30,000 per acre.

As Indian beans are comparable to the best in the world, multi-nationals are eyeing the Indian cocoa beans to make premium quality chocolates and cocoa products. A scarcity of cocoa has been predicted at a global level, multi-national companies are investing in the cocoa plantations in India to avoid the scarcity, some years from now.

Some multi-nationals are focusing on high quality, less yield models to farmers who want to grow cocoa. They have even offered transparent prices, competitive with the rest of the world.

On the other hand, farmers interested in high yielding varieties will also earn a profit from the domestic market.

Some enterprising small farmer co-operatives have sensed the international demand for cocoa. They and have started to invest up to 20% of the profits in quality improvement such as setting up centralised processing factories to get a standardised product. In this manner, small farmers can better the quality of the product and match the bigger plantations.

Thus, there is definitely a huge potential for good profit margins from cocoa plantation in India.

More government support is required

Though the government provides subsidies to cocoa farmers in India, it is not enough. For example, in Andhra Pradesh, the government gives a subsidy of 20,000 rupees per hectare for first three years. This is not enough for small farmers, if they have a loss two years in a row due to weather and other conditions. The Indian government should provide guidance to farmers interested in growing cocoa in India, so that they can grow the crop scientifically.

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Cocoa plantations in India can be a profitable business, with farmers being educated more about the crop and multinational as well as domestic investment to support small farmers. This is the right time for businesses to invest in cocoa, as they can get good ROI after a few years, due to the cocoa scarcity predicted worldwide.