(Bloomberg) — Across West Africa’s cocoa heartland, Eddie Arthur has spent a quarter of a century traveling from farm to farm each day to stare at trees and count how many pods they have.
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At every stop, he records the tally from a handful of trees, monitors flowers that can eventually grow into rugby ball-sized pods and tracks how dry or wet the ground is. Regardless of the weather or road conditions, the process is repeated at about 20 farms a day to gather data that helps predict the overall harvest size.
The job has hardly changed for decades. But the service that pod counters like Arthur at Forestero provide has become more important than ever as traders, hedge funds and chocolatiers try to gauge production in a market that has been rattled by an unprecedented shortage.
“With every visit to the farm you have a better idea of how the season is progressing,” Arthur said in Ivory Coast’s Gagnoa, where he was counting pods ahead of this year’s mid-crop. “I’ve done it for so many years that it has become part of my hobbies. But I treat every trip with the same level of seriousness and attention.”
Futures soared to a record last year after bad weather hurt crops in top growers Ivory Coast and Ghana. The rally’s severity surprised even seasoned market players, caused chaos across cocoa’s global supply chain and gave a reminder of how vulnerable supply is to extreme weather being exacerbated by climate change.
That’s prompting people to pay more attention to pod-count data to get an idea of production in an industry where supply data is relatively scarce.
“Pod counting has been important for more than 50 years but some had chosen to ignore the data,” said Steve Wateridge, head of research at Tropical Research Services by Expana, which also counts pods. “People became complacent with low prices. Now, there is more interest after people were caught out by what happened in the last 18 months.”
It’s much harder to get an idea of the supply picture in the notoriously opaque cocoa industry than for other major crops such as wheat or sugar. That’s due to a smaller amount of dominant players and because the governments in Ivory Coast and Ghana — which closely regulate the industry — rarely publish supply figures.
That’s why pod counters like Arthur can offer valuable insight.
He visits farms with a small team across Ivory Coast and Ghana throughout the year. By eye, they count pods by size on selected trees that they come back to again and again to estimate how the whole plantation is faring. They also keep an eye on issues such as pest infestations.
The information is recorded on a tablet and accessed by Forestero’s office in Lausanne, Switzerland for analysis that’s then given to clients including chocolate firms, processors, traders, shippers and hedge funds.
The count plays an important role in estimating global supplies and spotting crop-disease outbreaks, and becomes a more reliable indicator in the few months before the harvest. The visits also show how trees cope with seasonal extremes, such as the dusty Harmattan winds that start around November, and wetter periods.
“The roads are bad during the rainy season, but it’s also my favorite period,” Arthur said earlier this month. “The trees come back to life and I enjoy being in the farms.”
Forestero and Tropical Research Services are among a handful of independent pod-counting firms. Many big traders and processors have their own in-house counters, though closely guard the data.
Chocolate companies and funds are among those showing fresh interest in pod-count data, according to Forestero founder Fabrice Laurent.
It’s another sign of how funds — which can earn big money by capitalizing on rapid price shifts — are trying to get an edge in commodities and weather markets. Hedge-fund manager Pierre Andurand highlighted pod counts when talking about the cocoa market in December.
Gaining an advantage over other traders can be especially lucrative in a market like cocoa that has seen huge price swings. New York futures that almost trebled last year are now down about 38% from December’s peak, though remain historically expensive.
Although a tallying device has given way to tablets that upload data to the cloud, technology can’t easily replace the on-the-ground part of pod counting. Using drones to count would still need someone to guide them and some companies have tried harnessing satellite imagery, but it’s hard to separate plantations from other forested areas.
“Pod counting is the same as 20 years ago where you measured yield roughly through the same methodology,” Laurent said. “What has changed is the way you look at it, the type of analysis you can make, the type of calculation model you are using and the type of learning machine system.”
One change over the years is monitoring crop disease. Tropical Research Services was among the first to spot the spread of swollen-shoot virus in Ivory Coast almost two decades ago, and now pod counters are using in-field detection of the disease to map out the extent of the problem.
Crops are also increasingly at the mercy of more extreme weather conditions in the wake of climate change. That means tools like pod counting can be crucial in detecting if harvest prospects quickly shift.
“We know that global warming also plays a big role into unprecedented weather events and that is having a big impact on the cocoa production,” Laurent said.
–With assistance from Fraidoon Poya.
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