Cocoa Commodity Essay Example for Free

chocolate goodness EssayBackground hot chocolate beans ar seeds of the cacao tree, which is a instalment of the Sterculiaceae family. Contained in a cucumber same(p) fruit these yellowish, reddish to brownish fruits be divided into five compartments severally containing up to 10 seeds (Service). As the fruit begins to ripen, the partitions break down and the seeds ar found around the central funicle in a whitish pulp. The deep brown seed (i.e. bean) consists of the seed come on which contains the umber kernel. The hot chocolate kernel is the principal comp whizznt for the wareion of chocolate products. There are or so 20 k instantaneouslyn varieties of the Cacao sow, except moreover two are commonly used in producing umber products (Canizaro). The two varieties commonly used are * High Grade or Criollo cocoa which are spacious, roundish and brown in glossiness. They piddle a delicately bitter, aromatic flavor and are easily processed.* Common Grade or F orastero Cocoa which are sm wholly, flattened on the side and have a coloured red-brown to violet color. They have a sharper flavor and account for near 90% of the worlds hot chocolate harvest. The main areas of cultivation of the cacao tree falls within a narrow belt 10 north and southwesterly of the equator because the trees grow well in humid tropical climates with consistent rainfall and a short dry season (Cadbury). Cocoa trees need an even temperature mingled with 21 to 23 degrees centigrade, with a rainfall of 1,000 to 2,500 mm per socio-economic class to allege burnt umber seeds. The main producers of coffee are * double-u Africa Regiongold coast, Nigeria and Cote DIvoire. * to the south America RegionBrazil and Ecuador.* AsiaMalaysia and Ind unrivalledsia.Production ProcessCocoa trees begin to bear fruit when they are around 3-4 old age old. Each tree lead yield 20-30 pods per year, to each one pod containing 20-40 seeds which when dried are the cocoa beans o f commerce. The harvesting of the cocoa pod is real promote intensive workers cut the high pods from the trees with large knives attached to poles. The pods are so split open by hand and seeds (i.e. beans) are removed ready to beneathgo a two part solidifying process. The two part process includes fermentation of the bean and then they go under a drying process. Methods of fermentation kindle vary from country to country, but ordinarily only two methods are used the Heap method or the Box Method. Here is a diagram using either method to flesh outHeap MethodThe Heap Method is traditionally used on farms in air jacket Africa. Wet cocoa beans, including the pulp, are piled on banana or plantain leaves which have been spread out in a circle on the ground. More leaves are the piled on top to cover the heap and it is leftfield for five to sise days, turning the pile to ensure fermentation (Cadbury). During this fermentation process the pulp and astringency of the beans are remo ved as the sugar in the pulp turns to alcohol, which drains away causing the bean to develop its true deep brown flavor. When fermentation is complete the wet mass of beans is dried usuallyby universe spread out on mats under the sun.Box MethodIn the west close Indies, Latin America and in Malaysia the box method is used on plantations. It involves the use of strong wooden boxes with drainage holes or gaps in the slats in the base of the box. This en up to(p)s the passage of air and the removal of liquid products of fermentation. This process usually retorts six to eight days during which the beans are mixed twice. later fermentation is complete the beans are dried by means of special drying equipment.QualityThe quality of cocoa is based by the quality of the raw cocoa. fully ripened cocoa beans that have properly fermented consist of a brown to dark red color and have a very fragile kernel with a bitter flavor. Including the beans appearance and odor the beans essential as well be undamaged, un-germinated and must include no foreign matter or mold. They also green goddesst be infested with insects or have suffered wetting damage. Nor discount they smell sour, frowsty or smoky. Poor quality cocoa beans that have non been fermented properly are purple in color (under-fermented) or very dark in color (over-fermented). They also have a solid kernel and a very astringent mouthful. The quality of cocoa beans is assessed according to the following criteria* Good Qualities* Fully ripe, correctly fermented* Firm beans of uniform sizing with a dry weight of no less(prenominal) than 1g.* Loose and undamaged shell* Light to dark reddish-brown color* Readily crumbled, fragile Kernel* Bad Qualities* Unripe and poorly fermented* Moldy* Strong violet color as a result of under-fermentation* empurpled color as a result of over-fermentation* Firm Kernel* Insect infested* Germinated* Smoky odor collect equal to(p) to excessively long dryingMode of TransportAfter the cocoa has been harvested and quality has been assessed, the product should be shipped shortly after harvest, as ext residuumed storage (past 6 months) may result in losses due to the high relative humidities in the tropics. Cocoa beans should be placed in bags of jute or sisal usually of a (gross) weight of 60 65 kg, rarely of up to 100 kg (Service). Cocoa beans burn down be transported by ship, truck or railroad.When transported in a container, the cargo needs to be in a air out container so it is in compliance with let down limits for the water content of goods, packaging and flooring. The wooden flooring of the containers must be absolutely dissipated and dry. Water content should be 12%, corresponding to a lumber equilibrium moisture content of 70%, so that the flooring does not identify an additional semen of water vapor to dampen the cocoa cargo and container atmosphere (Service).The cocoa beans may also be covered with paper which pronto absorbs whatsoever moistu re. Also given the high value of cocoa, a two layer anti-condensation film should be used to provide addition protection against dripping sweat. An early(a) option is by transporting on flat racks in ventilated holds. This option is a more approach effective alternative to the costly ventilated containers.Uses of CocoaPrimary Use of CocoaSecondary UsePossible SubstituteWhen volume think of cocoa, the first things that may come to mind is chocolate or in the spirit of colder weather, hot chocolate. Chocolate and confectionary sweets are the most common uses of cocoa, but some(prenominal) an(prenominal) do not know that cocoa can be a great source for dietary reasons. The processed chocolate bars will not give the same effect for dietary purposes but it has been proven that the darker the chocolate, the healthier it is. Raw cocoa beans are sometimes eaten for their flavonoids which according to studies conducted by Eric Dung can advance cardio vascular health. northwestern Amer ica has undergone many c desc closinges in the last decade particularly placing an emphasis on healthy living.Cocoa has been proven to champion lower cholesterol, reduce blood pressure, and reduce the gamble for heart disease according to Suzanne Steinbaum director of women and heart disease at Lenox Hill Hospital. Cocoa also reduces cravings for those attempting to diet and want to reduce the add up of fare one may be eating. The smell of cocoa is so rich and aromatic that it actually helps satisfy hunger cravings. Cocoa can help come to skin as well according to dermatologist Ava Shamban, MD. Cocoa is loaded with antioxidants that help repair skin cells and neutralize harmful radicals.Cocoa has also do its way into pharmaceuticals. The oils extracted from cocoa beans proceed a solid at room temperature but melts within the body so this oil has been used to encapsulate reliable drugs. Cosmetics have also found the wonders of cocoa. There exists within cocoa a natural compo und that naturally prevents anything it is used with from suitable rancid. Makeup and soaps use cocoa in their products to keep the product from spoiling and can last for years.DemandThe demand for cocoa has subjoind from new grocerys for cocoa products and appendd gross revenue in existing markets. The reduction of tariffs to places alike Korea and Peru make it easier to compete in the market to hold and increase market share. Other influencing factors include the climate to grow cocoa, resources, technology and sustainable practices in parts of the world with little to no bringing up. There has been a lot of attention given to babe labor practices and the need to improve the process and quality of life of cocoa farmers. As sales have increased over the years, cocoa yields are not ontogeny fast exuberant has motivated big chocolate manufactures to protect their interests and invest in the incoming of cocoa. Chocolate sales reached over $100 million in 2011. While sales have been increasing the disparity between cocoa yields and the worlds need for cocoa will only be exacerbated if nothing is done. Farmers administration mingled challenges in growing this crop that directly impact their ability to meet demand.The World Cocoa launching states that farmers are dealing with aging trees that arent producing as much as well as a loss of 30 to 40 portion of their crop due to infestation and disease. These arent big industrialised farms that one can see in America almost 90 percent of cocoa comes from small farms in Africa, Asia and the Americas. For these farmers to help reach the demand for manufacturers prompt involvement from these companies is needed to ensure sustainability. According to the Fair Trade Foundation the demand for cocoa has been wage hike approximately 3 percent a year for the last 100 years (3). Production for the 2011/2012 grow season was 3,987 million tons (World Cocoa, 2). By 2020 on that target will be an estimated 1.5 mi llion ton paucity of cocoa (Bloudoff-Indelicato, Climate Wire, 1). One of the reasons for the increase in demand can be attributed to the rising wealth in China.According to Agrimoney.com thither has been a growing shift towards Western-style diets and cocoa powder-based products such as ice creams, biscuits and other confectionary. As the countrys lifestyle and culture changes with the increase in disposable income, the midsection class are developing a taste for chocolate. Chinas chocolate sales are expected to grow 19 percent to $1.2 billion this year (CNNFreedom Project). China isnt the only Asian country hungry for chocolate. Falling just below China is Indonesia with a 25 percent increase to $1.1 billion and India will most likely see a 7 percent increase as well. If Asian markets keep growing as predicted they could very well have 20 percent of the globose market by 2016 (CNN Freedom Project).Changes in export cost also make it more paid and easier to ship cocoa products to various countries. President Obamas National Export initiative plans to double U.S. exports within 5 years. To help achieve this goal the dialog of free switch over agreements aid American companies to meet the growing demand for cocoa products. Korea is the third largest exporter for U.S. candies with U.S. brands accounting for 16 percent of the chocolate sector. However American companies are at a disadvantage due to the FTA agreement that was signed to incrementally reduce tariffs and are unruffled paying between 5 to 8 percent tariffs. Some other global competitors seemed to have negotiated better free trade agreements and have seen a decrease on tariffs into Korea.Currently the U.S. companies have paid duties in excess of $18 million since the agreement was signed in 2008 (National Confectioners Association, 2). This will make it difficult for American companies to compete with global competitors because their costs of getting their product to market are greater. However , with the free trade agreements signed with various other countries will enhance exports into Korea to meet the increasing demand of chocolate. In 2011, imports of chocolate and other candies were up 30 percent from 2010 totaling $339 million (Korea Product Brief). The dramatic increase in imports is assure for chocolate manufacturers to try and increase their customer base in a rapidly expanding market.Starting October 31, 2012, Panama is eliminating tariffs on more than 86 percent of U.S. consumer and industrial goods (Poe). This includes chocolates and cocoa in countersinks which will help American companies continue to hang onto their 42 percent ($27 million) market share for candy, gum and chocolate exports. Panamas growing economy is expected to keep growing 5 to 8 percent each year through 2017 in conjunction with the implementation of the free trade agreement Panama could choke an alpha importer of cocoa products for American companies.Changes in cocoa productWhile fair trade and organic cocoa represent a small portion of the cocoa market at 0.5 percent there has been some growth in these sectors. Fair trade cocoa is cocoa from farmers that are compensated a fair amount for their product according to faritadeusa.org they also teach farmers sustainable processes and assist in quality of life improvement. Global sales have seen an uptick in fair trade cocoa from 14,000 tons in 2009 to 35,000 in 2010. This increase is attributed to the growth in the United Kingdom. The United States has also shown an increase of fair trade cocoa imports by 67 percent from 2009 to 2010 (fairtrade cocoa review, 8).With the looming cocoa shortage in the near future, cocoa users are realizing how important it is to be an active partner in sustainable cocoa practices. Manufacturers around the world want to protect their cocoa interests and ensure that there will be enough cocoa to keep up with the rising desire for cocoa products. Various companies have announced their pl ans and involvement in supporting sustainable cocoa practices as well as providing the farmers the assistance and education needed to ensure a bright cocoa future.According to their company websites the following companies have announced their commitments to provide the cocoa perseverance a promising future in the years to come.* Mars 14.6% global market share in 2010* 2020 all cocoa will come from certified cocoa* 2011- purchased 10% of cocoa used from certified sources* Nestle 12.6% global market share in 2010* Invest 110 million in sustainability, farmer training, social conditions, plant expertise* Commitment to purchase sustainable products* Kraft 8.3% of global market share in 2010* 5 year partnership with Bill and Melinda Gates Foundation to improve cocoa production and supply chain efficiency in West Africa* 2011 largest buyer of cocoa beans from certified Fairtrade farms and Rainforest Alliance Certified Farms* Ferrero 7.3% of global market share in 2010* In 2011 pled ged to use only sustainable cocoa by 2020 * Hershey 6.7% of global market share in 2010* everywhere the next 5 years will invest $10 million in West Africa to improve farming processes and communities * In 2012 U.S. consumers will be able to purchase Bliss products that are produced with 100 percent certified cocoa Implications of shortageCocoa shortages would have a huge impact globally. It will appropriate every member in the cocoa supply chain. Farmers will produce less and receive even less money to be able to go through off of. The farmers will have even less to invest into their trees continuing to increase the deficit in cocoa production versus demand. The incentive to continue cocoa farming would decrease and may drive farmers to cities to seek other employment or pursue more lucrative farming opportunities. In an effort to engagement the drug war in Columbia, farmers were enticed with trading coca (cocaine plant) growing for cocoa partly due to the high prices cocoa wa s selling for in the late 2000s (cocoa was selling for $3,520/ton in 2010 according to indxmundi.com). It is hard to convert coca farmers to start producing cocoa if the opportunity cost of growing cocoa is less than the opportunity cost of not growing cocaine plants.Not only does a cocoa shortage have a direct impact on the farmers lives, but also on their community because the monies from coca plants helps guerilla groups that the government has been fighting for years ( Weissmann). Companies that are dependent on cocoa for their income will face challenges in trying to make quality products that consumers have come to expect at a certain price. Some of the increase in purchasing costs will most likely trickle down to the consumer in order to protect the companies profit margin. Also companies may look elsewhere to save money, which can result in less cocoa production jobs. There are close to 50 million people that depend on cocoa for their source of income if nothing is done to help increase cocoa production it will take its toll on many peoples lives and their countries financial stability (Fairtrade and cocoa, 2).SupplyThe world of cocoa beans is centralized in none other than West Africa. In fact the top 5 cocoa bean producing countries are all located in West Africa countries being The drop Coast (Cote d Ivoire), Indonesia, Ghana, Nigeria, and Cameroon in that particular order. The off-white Coast has been the dominant producer of cocoa beans with production totaling nearly 1,242,300 metric tons of cocoa beans. This equates to about 29.3% of the worlds total cocoa beans. Indonesia is nowhere near the Ivory Coast in production, only totaling about 810,100 metric tons of cocoa beans a year accounting for about 19.1%. Ghana is close behind, producing about 632,037 metric tons of cocoa beans accounting for 14.9% of the worlds total. Nigeria follows with 427,800 metric tons accounting for 10.1%. Cameroon rounds out the top 5 accounting for 6.2% of the wo rld cocoa bean total producing about 264,077 metric tons a year. All these countries producing cocoa beans have experienced increases in production with the exception of Ghana who faced a decline in productivity from the year before.Those countries in West Africa account for nearly two-thirds of the world are the leading producers in terms of metric tons distributed to other companies for processing. With nearly two-thirds of the worlds cocoa producers in West Africa, they are close to monopolizing the cocoa industry. Processors of cocoa beans can find the best producers of cocoa beans in one area and these producers are more than willing to supply at the right price. Over forty percent of the worlds cocoa is consumed in atomic identification number 63 and the remaining percent is distributed across the world globally. Cocoa is the main ingredient in what is universally known as the worlds most democratic sweet, chocolate. There are about five-six million cocoa farmers worldwide, m any in West Africa. 40-50 million people depend on cocoa for their accompaniments as people especially in West Africa depend on the jobs that cocoa farms provide for the people who live in the area. The economics behind cocoa production is the livelihood for millions of West Africans. If the cocoa tree is taken away then the locals in West Africa may resort to the coca plant which is a base origin for cocaine production.This may also lead into more complications resulting in food riots from people not being able to feed themselves, and drug trafficking which can also have implications for human trafficking as well. There are certain conditions that may hinder or halt cocoa bean production. Like many commodities, cocoa is considered a soft commodity we can only continue to produce if we are careful with our product. Overharvesting is a major issue in the world of cocoa beans. In the early days of cocoa production, less cocoa beans were used to create milk and white chocolate was hi ghly desired in the less conscientious health world of the mid to late 1900s. In recent years there has been a major switch in preferences by consumers becoming more health conscientious. Most particularly in the Europe and North American markets has the demand for darker, healthier chocolate become more apparent. Due to these changes there has been an unprecedented cocoa consumption as more cocoa beans are being used to create dark chocolate in the last 5 years or so.In a study done by the Scientific American news article, a study revealed that further climate changes can cause West Africa to become too hot to grow cocoa beans. If this were to occur, domestic and international economies would be impacted immensely. The cocoa production farms have attributed to forbidding the spikes in poverty, drug trafficking, and food riots by providing many with a legitimate means of make money and providing for themselves and their families. It has been projected that by 2060 over half the co coa producing countries will become too hot. The cocoa industry is valued around $5.1 billion and with West Africa housing the top 5 producers. This includes the top two producers in the Ivory Coast, and Indonesia which account for more than half of the three million tons sold annually according to the World Cocoa Foundation. In 2020, predictions indicate a 1.5 million ton shortage.Weather predictions believe that El Nino could cause more problems for producers, consumers, and those who rely on the cocoa farms. As cocoa shortages increase, there are detain to be increases in demand for cocoa as more and more markets continue to buy into the commodity. In recent years, Europe and North America have been the largest buyers of cocoa. New countries however, are beginning to see the potential in cocoa and have begun to make their moves and are buying into a commodity that maybe wasnt as sought after before. China and South Korea are buying into the commodity, which will make it harder f or buyers to contract the amount desired if shortages continue and weather proves to be the deciding factor impacting West Africa. The hope now is that scientists can come up with a drought resistant strain of cocoa bean able to withstand the heat however farmers are taking it upon themselves to develop farming techniques to help the cocoa beans survive harsher conditions.Re-creating optimal conditions is such as temperature is easy, however re-creating the taste is nearly impossible. Change the pull downscape, or geographical location of where the cocoa beans are harvest, and the taste changes considerably. The need to keep cocoa producers in West Africa has become an important issue for many of West Africas population who depend on cocoa production for their livelihoods. West Africa currently holds the best location for cocoa production in terms of elevation, climate, and temperatures that give the cocoa beans its distinct look, taste, and aroma that attracts so many. wretched t he production to another country such as Asia or Russia, who broadly have cooler temperatures can impact the taste and quality of the overall product. West Africas location is great because it is near the equator which keeps the temperatures and weather conditions relatively warm. Conditions like these are difficult to find, if not impossible to find anywhere else.Also child labor has been a constant issue in West Africa. This is especially true in regards to the production of cocoa. This issue has been predominantly an issue in the Ivory Coast, who is the leading supplier of cocoa to many different companies in Europe, and North America. With cocoa prices remaining relatively low, the need to lower labor costs becomes a necessity as production struggles to survive thus children are active to work the crops for cheap. According to the International Cocoa Organization, it has been estimated that more than 109,000 children work in the Ivory Coasts cocoa industry and are working unde r the worst conditions.Not only are the conditions terrible by traditional standards but many as 10,000 of these kids are victims of human trafficking or enslavement. In 2010, a 10 million dollar program was given to the worlds top cocoa growing region in the Ivory Coast and Ghana who share a common cash crop. This program intended to prevent and stop the use of child labor on cocoa farms but faces many difficulties in its pursuit to end child labor in West Africa. By giving these companies the money to boost their revenue they can afford to not have child labor as a way to mitigate costs.Children are put to work carrying heavy loads, spraying toxic chemicals, and in risk of exposure of severely hurting themselves in the process of producing and harvesting crops. In a recent report in 2011 by BBC News, there was little change to the status with child labor on the Ivory Coast. Companies who buy from the Ivory Coast and any production plant in West Africa are being asked to take mor e responsibility and getting more involved with the production from which they are buying from. Simply paying for cocoa beans is not enough. The emphasis here is incarnate social responsibility. West Africa is undoubtedly in need of development and European and North America companies are the best possible source for development in West Africa. Roads, schools, hospitals, and social areas for the youth to gather would significantly help the people of West Africa. Companies such as Kraft foods, Mars Inc., Nestle, Ferrero Group, and Hershey Foods Corp are all major players in the cocoa industry who buy and process the cocoa beans into chocolate. The main distribution channel for the cocoa industry is the retail channel.Cocoa beans are harvested and sold by the metric tons to companies such as Kraft, Nestle, Ferrero, and Hersheys. These companies then process the beans and manufacture the final chocolate product in their factories which are then distributed to retail stores across the country. A primary value driver for chocolates and other confectionary sweets is taste. Despite the recent recession, the cocoa and chocolate industry continued to grow and expand. nation love chocolate and demand for chocolate has continued to grow. This demand and love for chocolate is beginning to make its way into highly populated areas such as China and India where the middle class is large, strong, and growing. Chocolate has been considered an affordable luxury. Despite rising health concerns chocolate is still in high demand, more specifically dark chocolate. The producers of cocoa beans like the IvoryCoast produce a commodity that is in high demand due to its versatility.Chocolate has many uses including, foods like desserts, sweets, and candy, medicine, and cosmetics. gamey chocolate has been proved to be part of a healthy diet. It is known to lower blood pressure and cholesterol, and has eight times the antioxidants of strawberries. In the chocolate and confectionary swe ets industry, there are many long standing traditions that make chocolate such a strong industry. For decades, chocolates have been a staple of gift giving, like blossom out shops who focus on the sale of flowers, themed chocolates and delivery. Companies such as Costco, who sell in bulk, sell assortments of chocolate and charge by the pound. Premium or high end chocolate has been increasing in sales since the economy has been making strikes in recovery from the recession. On site baking has become more popular now as the smell of chocolate acts as free advertising. The chocolate and cocoa industry has remained strong and resilient from effects of the economy and the recent recession. Currently West Africa is producing cocoa under unstable political conditions.The rumpus and civil war on the Ivory Coast has left the country divided and suffering. Despite accusations that the Ivory Coast production of cocoa beans has been providing weapons and funding for both sides of the civil wa r, the production has been a ray of hope for the country. Due to the jobs provided for the people living in West Africa, crime rates and drug trafficking has declined, allowing people to work for a living that provides them the opportunity to live a life free of drugs and violence that has torn the land apart. The turmoil from the civil war on the Ivory Coast has caused prices to rise. Despite the rise in prices, companies continue to buy but at some story in the rise in prices, companies will pass.In January the price for a ton of cocoa was a little over $2,300. In September prices sickly at the highest it has ever been this year at just over $2,600. The price fell just slight at $2,463.54 a ton in October. With the turmoil in West Africa causing unstable political governments and civil war tearing the country apart, prices are expected to rise. This data was courtesy from the international cocoa organization. Strategy to reduce cost and/or assure supplyWith any commodity in the 21st century, constant usage and harvesting are issues that if not monitored can lead to shortages in supply, or possibly depletion of the commodity. There are bound to be problems somewhere along the timeline that can affect the condition of the commodity. Cocoa is no different in that there is constant threat of the commodity becoming tight globally. Regardless of the recent recession and the recovering economy, cocoa is one of the few commodities around that wasnt affected to a great extent as other commodities.To begin the 2012 year cocoa per ton cost buyers a little over $2,300. From January through August, the price of cocoa faced many ups and down but never going any lower than the price point in January. In September the price peaked at its highest price point for U.S. companies purchasing cocoa beans per ton at over $2,600. Since then it has dropped somewhat but is expected to rise according to the International Cocoa Organization (ICCO). Here is a graph illustrating the price changes for the year (Data courtesy of International Cocoa Organization).According to the scientific American news, the cocoa industry is already reporting a 1.5 million ton shortage within the next 10 years or so. What could this potentially do to the price of cocoa in the coming months? Years? If shortages continue to increase than prices can only go up with each coming month. Now while the supply of cocoa decreases, global demand has been projected to rise for a commodity that is becoming more valuable and scarce by the order. The cocoa industry has a strong position in the market as a commodity that is versatile in its uses.The cocoa industry deals with futures contracts which basically means that the buyer agrees to pay for the shipment based on the price of the product the day the contract was made official. Commodity pricing unendingly fluxuates monthly, therefore a futures contract protects both parties from any undue damage from prices increasing or decreasing. Repor ts from several sources including the Huffington Post, and commodity help HQ, have high hopes for the future of cocoa in terms of it being able to sustain itself. Numbers at this time last year are up and there isnt a reason to really worry about the state of the cocoa industry. Placing an order for cocoa is very similar to writing a math equation.A simple cocoa contract consists of many key specifications. Each contract must state the ticker symbol, contract size or how much cocoa is being ordered usually in metric tons, deliverable grades which depends on the growth of the country or climate and is divided into three grades. Countries such as the ones in West Africa Ghana, Nigeria, Ivory Coast, and Sierra Leone are the main crops and receive a grade A classification. Classifications of B or C are littler and cheaper, such as Venezuela, Malaysia and Haiti. Next the trader or buyer must specific contract months, which are specified by letter coding for each month for example May is coded K. Next the trading hours must be specified, last trading day, last delivery day, price quotes, tick size which indicates what the size of the order is, and daily price limits. An example formula can read CC8K 1363. The CC is the ticker symbol, the 8 indicates the year (2008), K tells us the month which is May, and the number indicates the dollar amount per metric ton. Say the order size was 10 metric tons, the size would be multiplied by the dollar amount per ton.When it comes to possibilities of making cocoa in house, for many companies it becomes a daunting task and nearly impossible to simulate the conditions that allow cocoa trees to grow optimally. It is nearly impossible to produce the same cocoa beans as the beans grown in West Africa. Near the equator where its optimally warm, the conditions are right, the soil is ripe to grow cocoa beans in which give the bean a distinct taste. Moving production anywhere else may change the taste and alter the quality. Temperatures for healthy growth range from 69-90 degrees Fahrenheit. Temperatures lower than 59 can become fatal for the plant. Also adding to the tough conditions is that cocoa trees need no more than 2000 millimeters of annual rainfall. These conditions can leave the tree unprotected to climate changes.In a study done by the Scientific American news site, scientists are predicting that by 2060 half of the cocoa producing countries may become too hot. The heat is not the only problem in this situation its the pollinators of the trees that become affected as well. Bees and butterflies are common pollinators and cocoa flowers can be pollinated by midges, small flies or by hand. However these climate shifts in temperature could leave the country without bee colonies. In 1983-1984, cocoa production had reached a respectable level of 1.5 million tons. In twenty years this number doubled. The troubling fact to be considered here was that the number hadnt doubled because of any technological advancem ent but because more land was acquired.The Ivory Coast is one of the most unstable countries in the world not just politically but economically. Civil war has divided the landscape and because of the lack of growth the country has remained third world. Lack of education, jobs, and healthy outlets have left many West Africans to turn to drug dealing and human trafficking. With the extra land acquired for the cocoa trees, labor was short and there were plenty of children to put to work. The world is looking to put an end to child labor in cocoa producing countries. The cocoa industry has quite the road ahead of them towards recovery as an industry and as a nation for which they work in.Rea heedically there is no suitable substitute for this commodity. With nearly 70% of the worlds cocoa produced in West Africa, which includes the Ivory Coast, Indonesia, Ghana, Nigeria, and Cameroon. With climate changes making weather conditions too hot, which will indefinitely affect the top three pr oducers of cocoa beans in the Ivory Coast and Indonesia, and Ghana, it will become difficult for countries to get their cocoa. Before when it was just Europe and North America, supplies could take such a hit but with developing middle class countries like China, and South Korea coming into the mix it will be tougher to acquire what is needed. Shortages lead to price increases, and at some point companies will simply pass on the commodity and move onto other things until prices fall.There are several solutions to the problems environmentally, politically, and agriculturally in West Africa. Corporations who buy cocoa from these countries may need to step in to help the growth of the country by providing access to education, hospitals, all the essentials that help societies grow. Corporations may give money to these countries to help production and attempt to prevent child labor practices but it will never be enough. Political instability , civil war, and child labor are all issues con nected to the well being of communities secure to West Africa. Another solution is possibly a pipe dream but a realistic attempt at countering climate changes that could affect the cocoa trees.Scientists are working on creating heat resistant beans to counter the rise in temperatures so that crops can be more resilient and yield more. Moving crops to cooler climates in Russia and Asia have also been considered to balance the additional heat. One other solution is to help the farmers directly. Teach the farmers techniques show them methods that they can use on their farms. Help provide proper and modern tools and technology to make the entire farming process easier for everyone. It is difficult to say what is right and what is wrong in this slip but something needs to be done if European and American companies wish to satisfy a rising demand with such a versatile commodity.Commodity HQ, a trading a commodity research site predicts that the futures for cocoa is strong and has been s oaring compared to last years performance. Cocoa is one of the most popular soft commodities in the market. Regardless of the drop in futures and the effects of the most recent recession, cocoa has remained strong and resilient to any effects. By the end of 2011, cocoa futures have experienced a 41% drop. Comparing this years numbers to last year there is already a 7.6% increase and this number for this year has continued to soar. When looking at the production of cocoa, the Ivory Coast is the leader as they double the production of their next best competitor in Indonesia. The clientele who buy cocoa from West African countries like the Ivory Coast and Indonesia are modern, well developed countries like the U.S. whereas West Africa is still very much third world.As demand continues to grow as demonstrated with China and South Korea entering the cocoa market along with the U.S. and Europe, this list is only going to grow as the commodity becomes more popular. As weather conditions af fect the production of cocoa, civil war on the Ivory Coast, child labor, and over harvesting effect the commodity, shortages will occur. When shortages occur, prices rise exponentially, which leaves one to wonder how far can the price increase before companies around the world resolve to call it quits and pull out of the cocoa industry? People love chocolate, and that is not an understatement. Cocoa, cocoa powder, chocolate, and cocoa butter are all variations of the maestro plant. The future of cocoa looks very bright. The only external factors that may affect the commodity are the political strifes, climate changes, and practices in production.Works CitedCadbury. Cocoa and Chocolate. 2012. 26 October 2012 http//www.worldagroforestry.org/treesandmarkets/inaforesta/documents/cocoa%20and%20chocolate/cocoa%20and%20chocolate.pdf. Canizaro, Mark. All About Chocolate. 2002. 26 October 2012 http//www.xocoatl.org/variety.htm. Service, Transport Information. Cocoa Beans. 2012. 26 10 2012 http//www.tis-gdv.de/tis_e/ware/genuss/kakao/kakao.htm.