What do tonight’s dessert and your next investment have in common? Potentially chocolate, or cacao trees, at least. Consumer demand for specialty cacao beans continues to grow and is actually outpacing farmers’ ability to grow it in some areas. The demand for specialty or flavored beans used in premium dark chocolate goods is rising even faster than the traditional bulk cacao beans used in other candy that many farmers are used to growing. Like many other soft commodities, the production of cacao is concentrated in a small group of mostly developing countries in the tropics. These farms are susceptible to extreme weather, conflicts, credit shortages, and lack of working capital. Even so, cacao farms present an attractive option for investors looking for relatively low-risk opportunities.
Cacao traders and processors are shifting towards higher-quality beans, which are usually processed into more expensive dark chocolate with high cocoa content. There are orders for hundreds of tons of cacao beans that go unfilled because current farmers simply don’t have the capacity or funding to expand. Even though there are many farmers who are interested in increasing cacao production, there is limited access to suitable finance. This opens up an opportunity for investors, who are able to acquire underperforming raw land that is suitable for fine flavored and organic cacao production and invest the necessary funds to get it ready to farm. There is an urgent need for larger farms to be established and focus on increasing efficiency, yield, quality, and consistency by introducing good farming practices and much-needed capital.
There is a growing trend among consumers to seek organic and ethically-sourced products. Currently, more than 70% of the world’s cacao comes from African countries employing up to 1.5 million workers, many of whom are children or trafficked laborers. By investing in cacao farms in Central America, an investor can capitalize off of the socially-sustainable trend while improving the industry as a whole. Investment capital directly improves the lives of cacao farmers and others in the chocolate industry by providing them work for a living wage as well as benefits. In addition, investing in responsible cacao farming can help reduce repressive labor practices in the industry.
The timing is right for investors interested in expanding their portfolio with an alternative investment that has a high potential for success with managed risk. The chocolate industry is rapidly growing and prices are rising, meaning unparalleled profitability for farmers and investors. Affluent consumer behavior is trending worldwide, therefore increasing demand for gourmet chocolate and giving cacao farmers the opportunity to begin expansion, increase production and improve quality and reliability. For an investor looking to add a long-term asset to their portfolio, cacao farms can be an attractive option. The relatively low-risk investment can add some stability to a portfolio while also producing an increasing income stream as the trees mature.