1. Traders:  exchange rice or other goods for cocoa to very small-scale producers who typically dry their cocoa on the side of the road.

2. Mobile intermediaries: drive to farmers and buy on the farm; many times they are representatives of exporters or other intermediaries 3. Stationary intermediaries: set up purchasing centers in larger villages and towns 4. Export buyers: large exporters who buy directly from producers Most exporters have a pre-determined marketing margin and set buying prices by subtracting this margin from the international price. While the small number of large exporters makes for an oligopoly structure between which prices vary little, local intermediaries compete for market share and it is common that prices offered by intermediaries vary. Producers tend to get information on cocoa prices via radio; prices are broadcast several times a day during harvest season. The internal cocoa marketing system seems fairly transparent and competitive.

Historically intermediaries have not paid differential prices for better quality beans, even if they are fermented, because exporters were mainly targeting export markets in the US, where unfermented cocoa is in demand. The long time one-price policy of intermediaries, although fair for producers of low-quality cocoa, has provided a disincentive for other producers to improve cocoa quality. A change in pricing practices would require a change in signals from the exporters. A clear and transparent system of quality standards is needed before the market can transmit quality signals more effectively. Representatives of the industry noted that such standards will be provided by the Cocoa Council (more below) once it is created.

**<u>Table IV.12  Marketing Channels Used by Producers</u>**

|<br>Exporter|<br>34.3%|
|---|---|
|Intermediary|38.9%|
|Cooperative|6.3%|
|Producer Association|16.6%|
|Other|9.6%|

Source: CRMG Survey The CRMG survey indicates the importance of commercial exporters in the direct purchasing of cocoa, with about 34% of respondents reported marketing their cocoa through a commercial exporter (see table IV.12)<sup>61</sup> . Intermediaries accounted for about 39% of the purchases. About 17% of respondents marketed though producer associations and 7% through cooperatives, but producer associations act as aggregators and export via cooperatives.

# **E.2 Cocoa Exporters**

Cocoa exports are concentrated among five exporters, four of which are commercial firms and one is a large producer cooperative. Historically in the Dominican Republic there have been four dominant exporting firms (some of whom also export coffee) and they collectively exported about 90 to 95% of Dominican cocoa. Two firms - Nazario Rizek and Commercial Roig accounted for about 70-75% of all cocoa exports. In the past five years, this domination of cocoa exports has been challenged by the CONOCADO producers cooperative (see table IV.13). As of 2002, CONOCADO had some 11,000 members, about 25% of all cocoa producers, and the highest market share of all exporters.

61 A clear bias of the survey is obvious from table IV.12: the sample did not represent the large number of small-scale producers who joined CONACADO, a cooperative, in recent years.

64