Brazil's Cocoa Industry Embraces High-Tech Farming to Boost Production

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In Brazil, a small train-like device is revolutionizing the cocoa industry by automating the process of husking ripe cocoa pods. This innovation is part of Brazil's broader initiative to modernize cocoa production, aiming to rejuvenate the sector and address the global cocoa bean shortage, primarily caused by challenges faced by leading producers in West Africa.

The global cocoa market is under strain, with prices soaring to unprecedented levels this year due to adverse weather, diseases, and structural problems affecting supplies from Ivory Coast and Ghana. The situation is exacerbated by the limited financial capacity of farmers in these regions to invest in enhancing productivity. In contrast, Brazil's agricultural sector, known for its expertise and financial resources, is poised to capitalize on this opportunity by adopting advanced farming techniques.

Laerte Moraes, a senior executive at Cargill Inc. in South America, highlights Brazil's potential to become a highly efficient cocoa producer, leveraging the country's favorable conditions. Cargill is actively engaging with Brazilian farmers and chocolate manufacturers to foster new investment phases in cocoa cultivation, particularly in unconventional areas like the Cerrado savanna.

Despite Brazil's current status as a net importer of cocoa beans, contributing less than 5% to global supplies, the country is ambitious about reclaiming its position as a major supplier. Efforts are underway to double Brazil's cocoa output to over 440,000 tons annually by 2030, which could surpass the production volumes of Nigeria and Cameroon.

The introduction of new machinery that operates effectively in direct sunlight and on flat lands, combined with enhanced irrigation, fertilization, and the use of disease-resistant seedlings, is expected to significantly increase productivity. Some farmers employing these advanced methods report yields as high as 3,000 kilograms per hectare, far exceeding the national average.

Agrícola DM4, a farming group in Bahia, has adopted the innovative harvesting machine to cut costs and expand cocoa cultivation more rapidly than planned, driven by the rising cocoa prices. Fernando De Martins, the CEO, anticipates sustained high prices and increased planting enthusiasm among producers.

Even multinational corporations like PepsiCo are exploring cocoa cultivation in Brazil, experimenting with plantations alongside coconut trees in some of the country's driest regions. The promising results have led to plans for further expansion, underscoring the potential of Brazil's cocoa sector.

As Brazil adopts cutting-edge farming technologies, the global market is beginning to take notice. The country's efforts to modernize cocoa production could soon make it a key player in addressing the worldwide cocoa supply challenge.

Disclosures

I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.