By Marcelo Teixeira
RIACHAO DAS NEVES, Brazil (Reuters) - In the Brazilian state of Bahia, farmer Moises Schmidt is developing the world's largest cocoa farm.
His plan is to revolutionize the way the main ingredient in chocolate is produced, growing high-yield cocoa trees, fully irrigated and fertilized, in an area bigger than the island of Manhattan that is not currently known for producing the beans.
Schmidt's $300 million plan is the largest and the most innovative in that region, but not the only one. There are similar super-sized projects under development, some of them nearly as big, as well-capitalized farming groups look to apply industrial-scale agriculture expertise to cocoa production to profit from sky-high prices for the beans.
If those plans work, the industry's center of gravity could shift back to Brazil, where the cocoa tree is native, from West Africa.
"I believe Brazil will become the world's cocoa breadbasket," Schmidt told Reuters while walking amid row after row of young cocoa trees stretching to the distance in this flat savanna land in the country's Centre-North region.
He estimates that as much as 500,000 hectares (1.236 million acres) of high yield cocoa farms could be in place in Brazil in 10 years, which would produce as much as 1.6 million tons of cocoa.
By comparison, Brazil currently produces only around 200,000 tons, while the world's top grower Ivory Coast harvests 10 times more than that. Ghana, the second largest global grower, produces around 700,000 tons of the beans.
Currently, the global cocoa industry is in crisis. Production is failing in Ivory Coast and neighboring Ghana, which between them grow more than 60% of the world's cocoa. A potent mix of plant disease, climate change and aging plantations has led to three consecutive years of falling output.
That's been bad news for chocolate lovers. Cocoa prices nearly tripled in 2024, hitting a record high of $12,931 a metric ton in December. The price has since come off to around $8,200, but remains well above the historical averages.
OPPORTUNITY IN CRISIS?
For Schmidt and other farmers in Brazil, the crisis is viewed as an opportunity. The Schmidt Agricola family business started preparing to cultivate cocoa in 2019 after concluding with the help of an in-house assessment of the cocoa market that there would be a future supply shortfall.
"We just didn't think it would happen so soon," he said, as he walked through the greenhouses on his farm that nurse seedlings.
His planned 10,000-hectare (24,105 acres) farm would dwarf the size of the small farms in West Africa that typically span a few dozen hectares. There are large farms in other producing countries such as Ecuador and Indonesia, some of them going over 1,000 hectares (2,471 acres) in size, but still much smaller than Schmidt's planned giant.
The plan is to apply large-scale agriculture techniques to the fully irrigated cocoa farm as if it were a soybean or corn field. The trees in the farm in the municipality of Riachao das Neves in the west of Bahia state will be packed together, leaving only enough room between them for mechanized watering and application of fertilizer and pesticides.
Schmidt is planting 1,600 trees per hectare in the new areas, compared to only 300 trees in conventional farms. The concentration should mean a much higher yield per hectare.
"The only thing that is not mechanized yet is the fruit picking from the trees," the farmer said.
Some see this method of farming as a game changer.
"Five years from now everything we used to know about cocoa production would have changed," said Tales Rocha, a cocoa agronomist for TRF Consultoria Agricola, a company that advises farmers in Brazil.
Rocha said the savanna region in Western Bahia has the ideal topography for large scale agriculture, with its extended flat expanses.
Farming groups such as Schmidt Agricola already produce soybeans, corn, cotton and fruits in thousands of hectares in Western Bahia, a region with ample water supplies.
MILLIONS OF SEEDLINGS
At the new farms, the cocoa trees are grown in the open, with plenty of sunlight. This contrasts with traditional cocoa plantations elsewhere in Brazil and worldwide, where cocoa trees share space with other types of trees and get some shade.
Schmidt is developing high-yield trees through a seedling operation he has been running since 2019. His team has produced new cocoa varieties through so-called positive selection, a years-long project where seedlings are multiplied from material taken from the plants that produced the highest fruit load in test fields.
The high-yielding trees planted on some 400 hectares (988 acres) in the first phase of the project are producing around 3,000 kilos per hectare (kg/h) (6,613 pounds), or 10 times the average yield of traditional cocoa areas in Brazil. Schmidt said his target is to get past 4,000 kg/h (8,818 pounds). That would be eight times the 500 kg/h (1,102 pounds) average yield in top producer the Ivory Coast.
Very high yields above 2,000 kg/ha have been reached in small test fields run by the Executive Commission for Cocoa Cultivation Planning, Brazil's cocoa research agency, using high density of plants.
The researchers, however, said the results would need to be confirmed with larger scale planting and added there were questions about the economic feasibility of such practice, that would require extensive crop care and workforce.
Schmidt's nursery installation, which operates as a separate company called BioBrasil, uses propagation machinery from Denmark's forestry equipment maker Ellepot with capacity to produce 10 million seedlings per year. It produces the trees for the planned giant farm and also sells seedlings to other cocoa projects in Brazil.
Some people in the market, however, are not so certain this kind of expansion will indeed happen in Brazil.
"As always, price is the key determinant. At around $4,000 per ton Brazil was barely interested," said Pam Thornton, a veteran cocoa consultant and beans trader.
"After talking to many Brazilian farmers and visiting a bunch of large commercial farms, I believe world prices have to demonstrate that they will remain near current price levels for another year or so for them to expand acreage, and probably several thousand dollars higher for it to be in a meaningful way," she said.
Schmidt says that cocoa from his operation would be profitable even at around $4,000 per ton. "Above $6,000 it is super profitable, much better than soy or corn," he said.
Long-term supply and demand projections seem positive for prices, considering that production in West Africa is stable or "locked into a long cycle of diminishing outcomes," said U.S.-based veteran cocoa broker and analyst Marcelo Dorea, Chief Executive of M3I Capital Management.
"The market must, heretofore, seek alternative sources of meaningful production," he said, adding that Brazil looks like a natural option considering cocoa know-how and land availability.
BIG COCOA IS WATCHING
Schmidt Agricola cultivates more than 35,000 hectares with soybeans, corn and cotton in Bahia. It has preliminary agreements through memorandum of understandings with chocolate producers and cocoa traders, Schmidt said.
Cargill, one of the world's largest commodities traders and food processors, is already a partner in the initial phase encompassing the 400 hectares, and is in talks to expand the partnership.
Schmidt said that nearly all of the big cocoa traders or chocolate companies are talking to him and other farmers in Brazil regarding expansion and supply deals.
The partnerships would include investment to develop the projects, and in return the investing companies would guarantee cocoa supplies, he said.
"We are working on the contracts now," he said, declining to name the firms, citing non-disclosure clauses.
Barry Callebaut, the world's largest supplier of cocoa products and chocolate, is in talks to partner with farming group Fazenda Santa Colomba in an investment to form a cocoa farm of 5,000 (12,355 acres) to 7,000 hectares (17,300 acres) in the municipality of Cocos in Western Bahia, two sources familiar with the negotiation told Reuters.
Santa Colomba declined to comment.
Barry Callebaut confirmed it has signed a partnership with one farming group in Brazil for a 5,000 hectare cocoa farm in Bahia, but declined to name the group. The deal is part of the Future Farming Initiative launched by the company to boost high-tech cocoa farming and to diversify its geographical presence.
"We are making good progress with FFI and continue to see interest from partners, clients, and investors globally," it said.
Mars, the U.S. producer of Snickers bars and M&Ms, has set up a cocoa test field not far from Schmidt's farm in Riachao das Neves, Bahia.
The company said its test field in the area is part of its efforts to deal with climate change and falling cocoa productivity around the world.
"Bahia is attractive due to flat topography, fertile soils, reliable water availability and established agronomical infrastructure," said Luciel Fernandes, a manager at Mars Center for Cocoa Science in Brazil.
POTENTIAL RISKS
A leading cocoa researcher in Brazil, however, is worried.
Plant pathologist Karina Peres Gramacho, who works for CEPLAC, believes there are risks to the plans for extensive cocoa fields in Western Bahia.
The fact that each of those mega projects are based on thousands of clones of the same type of tree could leave the future fields vulnerable to diseases, which are very common in cocoa cultivation.
Brazil was once second only to Ivory Coast in cocoa production, but a devastating fungus in the 1980's known as Witches' Broom decimated thousands of hectares of cocoa crops.
Gramacho supports the idea of using more developed and regionally adequate varieties, usually hybrids that combine qualities from more than one genotype.
Some industry analysts also have questions about the quality of the cocoa that would be grown in direct sunlight, because fruit that is produced in shade is typically considered to have superior taste.
Cristiano Villela Dias, scientific director at Brazil's Cocoa Innovation Center (CIC), says that some initial tests with the fruits produced in Western Bahia indicated no discernible difference in taste.
"The quality of the beans is very similar to the best cocoa produced in Brazil or other countries," Villela said, adding that optimal after harvest treatment, particularly with fermentation and drying, would make a bigger difference for beans' quality.
Mars said it had tested the cocoa produced in the area and had not identified "a fundamental difference in taste or quality that is directly and exclusively associated with full-sun cultivation."
(Reporting by Marcelo Teixeira; Editing by Simon Webb and Anna Driver)
