Ivory Coast and Ghana struggle to increase their share of the pie

Cocoa beans in a warehouse near Sunyani, Ghana in April 2019.

Ghana and Côte d’Ivoire account for two-thirds of the world’s cocoa, but, unlike oil-producing countries, they fail to influence the prices of “brown gold”, historically low and insufficient to support small farmers. Africans. “They could set market prices, especially if they allied themselves with other major producers like Ecuador, Cameroon and Nigeria, but there is a lack of real political will.”, said an expert on condition of anonymity.

Abidjan and Accra have only started to really collaborate since last year: they obtained from multinational cocoa and chocolate companies like Nestlé a bonus, called a “decent income differential” (DRD), of 400 dollars (around 340 euros) per ton of cocoa, applied from the 2020-2021 campaign, which started in October. This resulted in an increase of more than 20% in the price paid to planters in Côte d’Ivoire, to 1,000 CFA francs (1.52 euros) per kilo.

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In addition, for the first time in years, the two neighboring countries of West Africa aligned their prices to avoid trafficking, which was commonplace, between Côte d’Ivoire, the world’s largest producer with more than 40 % of the market, and Ghana, second with more than 20%. But on the two major cocoa trading markets, London and New York, prices have remained stuck below $ 3,000 per tonne for more than four years.

“The decisions of Côte d’Ivoire and Ghana matter, but there is a slight overproduction of cocoa and the coronavirus crisis is slowing demand”, analyzes Jonathan Parkman, of broker Marex Spectron, for whom it is not certain that the DRD will last beyond this season. Moreover, the expert points out, cocoa is, like other agricultural products, a speculative product, the prices of which are partly disconnected from the real economy. The London and New York stock exchanges thus trade each year the equivalent of 30 times world production.

An oversupply

Historically, the real price of cocoa remains two times lower than that of the 1960s and even nearly four times lower than the peak reached in the mid-1970s (the height of the Ivorian economic “miracle”), according to the World Bank, weighed down by a quasi-structural excess supply. A boon for buyers, but a curse for planters in tropical countries, who receive only 6% of the 100 billion dollars per year represented by the world market for cocoa and chocolate, locked by the big industrialists.

Publicly, they have shown their support for the DRD, while consumers demand a more “ethical” chocolate. “The coordination of Côte d’Ivoire and Ghana is a very positive factor, they have an interest in developing their power to act on the market”, says Patrick Poirrier, CEO of the French chocolate maker Cémoi and president of the chocolate union. But several obstacles stand in the way if they, like the Organization of the Petroleum Exporting Countries (OPEC), want to weigh on prices by controlling supply.

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First, the amount of cocoa produced each year does not adapt “At the option of a faucet that we open or close”, recalls Mr. Poirrier, and “It is difficult to ask a cocoa farmer, who undertakes twenty years by planting a cocoa tree, to produce less”. But for twenty years, the world harvest has been in surplus every other year, a situation favorable to buyers to obtain lower prices. The lack of storage capacity for fragile and perishable cocoa near the production sites, as well as its high cost, hamper control very early in the chain. The construction of two new warehouses with a total capacity of 300,000 tonnes in the ports of Abidjan and San Pedro, in Côte d’Ivoire, was nevertheless announced at the end of September.

To set up an OPEC for cocoa, “All the producing countries should be able to participate”, also notes Philippe Fontayne, former president of the International Cocoa Council: “But I’m skeptical of their ability to agree on the rules of the game.” The failure of the Alliance of Cocoa Producing Countries (Copal), an organization founded in 1962 which has never succeeded in establishing itself in the world market, is remembered. The Coffee-Cocoa Council, an Ivorian public body that manages the sector, and its Ghanaian counterpart, Cocobod, have not responded to AFP’s requests.

The World with AFP

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