Cocoa Deliveries Continue to Lag in West Africa

Global cocoa prices seem to be on an upswing after riding the speculative roller coaster up and down earlier this year. The New York closed for March cocoa reached $2,610/ton, a new high after falling as low as $2,080 in November.  This time around, though, that increase seems to have some real basis on the ground. There is less cocoa to be had.

The current season started with the refusal of Ivorian farmers to accept prices lower than the suggested minimum price set by the Management Committee in Abidjan. Although the embargo did not last very long–farmers, after all, have bills to pay–it set a trend that has not been reversed yet.

As of 14 December, the port deliveries of cocoa in the Côte d’Ivoire reached 356,000 tons, a little over half of what had been delivered during the same time period last year. As a result, the farm gate prices for farmers have increased and are now beginning to reach the CFA700 level set by the Management committee. According to Reuters, farm gate prices in Agboville reached that level while other areas were closing in on that benchmark. The country has revised its estimate for production down to 1 million tons from 1.3 million tons earlier.

In neighboring Ghana the situation is not much different. There, licensed buying firms reported acquiring about 300,000 tons of cocoa for the first 12 weeks of the season, down from 480,000 tons a year earlier. Although farmers in Ghana did not refuse to sell to buyers, the weather has been a factor in the lower production. Buyers report difficulty finding cocoa for sale.

“Nobody seems to know where the cocoa is. We had expected to be seeing the end of the bullish period at this time, which normally gives way to other diversionary activities such as the Christmas but that didn’t happen this year,” a top buyer said.

The Ghanaian COCOBOD has secured financing for 650,000 tons, down from 740,000 tons last year.

The only good news seems to come from Nigeria where production has increased by 3 percent over the last year. Still, prices have increased there as well. But Nigeria’s production is not large enough to make of for the shortfall in its neighbors.

Unless these production figures change–and that is always possible, Ghanaian buyers seem to think that their numbers will improve–the world is likely to see a real shortfall of about 400,000 tons this year. And that should have some impact on chocolate prices.

One of the interesting lessons to be taken away from the current season is that increases in production do not necessarily benefit farmers. A 40 percent decline in deliveries in the Côte d’Ivoire has increased farm gate prices by almost 40 percent. For the farmer that means the same income for less work. Any increases in production are only like to lower the price.

So the logic of the market conflicts with that of the individual farmer. It makes perfect sense for individual farmers to want to increase their production in the hope to achieve higher income. But that logic falls apart if all farmers do the same thing, since, collectively, it will increase output and decrease prices. The trick is to find the proper balance. For the moment, at least, that balance seems to work for the farmers in the Côte d’Ivoire.

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