More Trouble for Cocoa…

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More Trouble for Cocoa…

Cocoa business has always been troubled. Back in August 2014, Siaka Momoh did a story titled ‘The Trouble with Cocoa Business’. And only recently, more storm has come to trouble cocoa. Please permit us to take you through the stormy turf of cocoa this week.

…Ivory Coast, Ghana ease tug-of-war with buyers over cocoa prices

Ivory Coast and Ghana have been pressing chocolate giants to pay higher prices for cocoa beans to help the poor, according to AFP report November 21, 2022.

Ivory Coast and Ghana, the world’s two biggest cocoa producers, said Monday there had been progress towards resolving a tug-of-war with chocolate giants on prices.

The two countries had set a deadline of Sunday for manufacturers to pay higher prices to their growers.

But in a joint statement, industry bodies said the talks had yielded agreement to set up a working group to explore the problems, and report back early next year.

The producer countries also praised “the efforts made by certain companies” to find a solution for sustainable farming, the statement said.

The quarrel focuses on the Living Income Differential (LID) — a policy Ivory Coast and Ghana introduced in 2019 to fight poverty among cocoa farmers in the global $130-billion chocolate market.

Under it, Ivory Coast and Ghana vowed to charge a premium of $400 per tonne on all sales of cocoa beans, starting with the 2020/21 harvest.

But their trade boards say the scheme is being undercut by buyers who depress the price of another premium based on bean quality.

They have accused purchasers of clawing back the LID cost by exerting pressure on the “origin differential” premium, which has plunged below zero in recent years.

They set November 20 as a deadline for bringing buyers into line.

They threatened to punish corporations by barring them from visiting plantations to estimate harvests — a key factor in cocoa price forecasting.

And they also threatened to suspend sustainability programmes that chocolate giants use to enhance their image given the increasing ethical concerns of consumers.

Progress

Monday’s joint statement was signed by the Ivorian Coffee-Cocoa Council (CCC), the Ghana Cocoa Board (Cocobod) and the Ivory Coast-Ghana Cocoa Initiative (CIGCI).

The communique said producers had been in talks with chocolate manufacturers and other players in the industry.

The producers “noted the efforts made by certain companies and their desire to jointly find solutions for sustainable cocoa production that places farmers at the heart of this strategy”, the statement said.

“Under the auspices of the CIGCI, a working group of experts composed of representatives of member countries and cocoa sector stakeholders has been set up to study solutions to better resolve certain problems and to guarantee a sustainable price mechanism in the long term,” it added.

The panel is expected to report back in the first quarter 2023.

The two countries together account for 60 percent of the world’s cocoa but their farmers earn less than six percent of the industry’s global revenue.

Value-added call

Ivorian Prime Minister Patrick Achi told a press conference on Monday “the solution (to the row) is to process 100 percent of our cacao” in Ivory Coast.

His remarks touched on long-standing demands by producer countries, who say they lose out on jobs if they fail to get into the value-added parts of the chocolate business.

At present, only about a quarter of Ivorian production is processed into cocoa in the country itself.

Ivory Coast by itself accounts for 45 percent of world cocoa production.

…Nigeria inspired by Ghana, Ivory Coast cocoa premium deal – Africa News

Nigeria and Cameroon have become the latest African nations to seek ways of jointly negotiating with cocoa buyers for a better premium, a move that is inspired by the decision of top growers Ivory Coast and Ghana to boost prices for their crops.

The plan suggested by Nigeria, the world’s fourth-largest cocoa producer, is part of a drive-by growers in West Africa and Latin America to try to address a perceived imbalance between farmers’ incomes and money made by big commodities traders.

Ghana, Ivory Coast move

Ivory Coast and Ghana, which account for nearly two thirds of global output, have imposed a fixed “living income differential” of $400 a tonne on all cocoa contracts sold by either country for the 2020/21 season.

Despite being the world’s leading cocoa producers, the two countries exert limited influence over international prices. Cocoa-producing countries have sought ways to protect farmers from market swings after global overproduction sent prices crashing in 2016-17, and oversupply has meant a slow recovery.

World Cocoa Producers Organisation Vice President Sayina Riman, who doubles as president of the Cocoa Association of Nigeria, said Ivory Coast and Ghana had effectively agreed a $400 per tonne premium above global prices for their cocoa, and that Nigeria wanted to follow suit to protect its farmers.

  Nigeria and Cameroon follow suit

Nigeria and Cameroon both account for around 10% of global production and have the potential to more than double output within five years, Riman said.

The countries share a border and similar weather. Nigeria has had informal discussions with Cameroon, Riman said. “We are talking to Cameroon to see if we can become a regional bloc … and see if we can get our buyers who know our quality to give us better differentials,” he said in a telephone interview.

“We need to approach it as a bilateral discussion,” he said. Peru has said it would propose a minimum price of $3,200 per tonne to its regional growers, which together make up 17% of global output, after the moves by West African producers. Riman said private sector representatives in Nigeria would hold talks with the government this month (November 2022) to map out a plan after which the country would formally engage with Cameroon. He said Nigerian officials had also met with Dutch and British officials about boosting cocoa exports to Europe rather than selling beans through third party buyers in Asia.

Cameroon’s trade ministry is unaware of the Nigerian plans, said its spokesman, Serge Eric Epoune. In contrast, a source at the country’s National Office of Cocoa and Coffee, who did not want to be named, said talk of the plans were just “rumours”.

 Can Nigeria pull this off?

A top cocoa trader at one of the world’s biggest agriculture trade houses did not see how Nigeria and Cameroon could team up, because Nigeria does not have a central cocoa authority, unlike Ivory Coast, Ghana and Cameroon. “I believe the Nigeria and Cameroon prices will move up in line with Ivory Coast and Ghana … because of supply and demand,” said the trader. “If Nigeria becomes too cheap, everyone will buy Nigeria and the market will adjust higher automatically, but not because they teaming up,” the trader added.

Farmgate prices in Nigeria rose to around N720,000  ($2,353) per tonne from N650,000  in September. There are fears the weather outlook could dampen output. Nigerian production for 2019/20 could dip about 3-5% to around 305,000 tonnes due to excessive rainfall, Riman said, estimating 2018/19 output at 310,000 tonnes. The International Cocoa Organization puts the 2018/19 forecast at 250,000 tonnes.

Siaka Momoh is the Publisher/Editor, of The Real Sector; www.realsectornow.com;

 

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