Bloomberg - Ivory Coast,
the world’s biggest cocoa producer, cut farmers’ pay for the new main season by
more than a third as forecasts for a second annual global oversupply weigh on
prices.
Farmers will receive a
guaranteed price of 700 CFA francs ($1.23) a kilogram for the larger of the two
annual harvests that starts this month, compared with 1,100 CFA francs a year
ago, Lambert Kouassi Konan, chairman of cocoa regulator Le Conseil du
Cafe-Cacao, told reporters in the commercial capital, Abidjan, on Sunday.
The price is the same as
what producers got paid for the smaller harvest during the six months through
September and is the lowest for the main crop since 2012, when the nation
reformed the sector to secure better compensation for farmers.
The pay would’ve been even
lower if President Alassane Ouattara hadn’t agreed to suspend registration
taxes for exporters to support prices, Konan said.
“The season is starting in a
context marked by a surplus production in all countries,” he said. “It means
we’re in a situation of a market which continues to decline.”
Bumper Crops
Cocoa futures slumped by
more than 40 percent in the 12 months through April and have struggled to
recover since, partly because bumper crops in both Ivory
Coast and neighboring Ghana, the No. 2 producer,
bolstered expectations for a global surplus of the beans. World supplies
may exceed demand by 97,500 metric tons in the 2017-18 season, according to the
median estimate in a Bloomberg survey of 10 traders, analysts, brokers and
grinders last week.
Grinders have built
sufficient stocks while a likely decrease in global production won’t be enough
to support higher prices, Konan said.
"We have set this price
with great sadness," Konan said. "Ivory Coast’s production has made a
spectacular jump and output in other countries has increased too. There’s been
too much cocoa and the price has dropped."
The farmgate price decided
by the government isn’t high enough for the thousands of farmers growing the
beans throughout the West African nation, said Robert Kongo, the head of a
farmers’ cooperative based in Duekoue, in the country’s west.
"We are not happy at
all. We were expecting a better price than the one of the mid-crop," Kongo
said after the announcement. "700 francs, it’s not a good price for us --
it’s hard to support one’s family with such a price."
Border Surveillance
Prior to Sunday’s
announcement, Ouattara consulted with his Ghanaian counterpart, President Nana
Akufo-Addo, to narrow the price gap between the two countries, Konan said. Ghana
has chosen to keep prices unchanged at the equivalent of $1,725 a ton since
October last year and is ruling out a cut for the new season, raising the
likelihood of smuggling from its neighbor.
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“If Ghana maintains its price as Ivory Coast
does, it’s clear that cocoa will flee to this country,” Konan said. “The
presidents have discussed. I don’t know the outcome but I think that certainly
they will reach an agreement.
The cocoa regulator gave 15
vehicles to security forces to increase surveillance of border areas, Konan
said.
Ghana will start the new season’s purchases on Oct. 13,
Joseph Boahen Aidoo, chief executive officer of the regulator known as Cocobod,
said on Sept. 29.
“Price reduction is impossible,”
Aidoo said. The regulator “is a shield that protects the farmers from shocks.”