I reported a couple of weeks ago that the new management committee for the cocoa sector in the Côte d’Ivoire set a new indicative price of CFA700 ($1.48) per kilogram for the 2008/09 cocoa season. That represented a forty percent increase over the indicative price of the previous season. I also reported that this indicative price is not a mandatory price. That is, traders and other middle men can pay more or less depending on the quality of the cocoa and market conditions. But that’s not how Ivorian cocoa farmers see it.
Cocoa farmers, of course, know that the world market price, although far from the July high of $3,200/ton, still hovers around $2,100/ton. So they rightly consider $1,480/ton, the inidicative price, the minimum they should receive.
Traders and wholesalers, on the other hand, claim that they cannot pay that price since the going wholesale price in San Pedro, the major cocoa export port of the Côte d’Ivoire, amounts to only CFA600. The announcement of the management committee has therefore raised expecations that traders and wholesalers will not honor.
I predicted two weeks ago that farmers will react to the lower prices by putting less effort into the fermentation and drying of cocoa. But they have reacted in much more organized ways. Reprising the protest actions West African cocoa farmers have used since the 1920s, they are withholding cocoa from the ports.
Beginning last week, farmers refused to sell cocoa for less that CFA700. As a result, a lot fewer beans have been delivered to port in the new season. Reuters reported that exporters estimate that only 15,000 tons were delivered for the week of Oct. 13-19 compared to 50,315 for the same week a year ago.
A new strategy emerged this weekend according to Bloomberg. The National Union of Individual Cocoa Producers and Cooperatives blockaded the port of San Pedro to prevent the delivery of beans and force a higher price. The effort appears to be well organized with cocoa farmers stopping all trucks approaching the port and refusing to let trucks loaded with cocoa pass. SAF-Cacao, one of the major exporters, closed their warehouse to avoid trouble according to Reuters
At the moment, it is not clear who’s in a better position. Global cocoa stocks are down and chocolate manufacturers need a steady supply, so this may favor the farmers. But the economic recession that is spreading around the world will probably curtail chocolate consumption. In that case, manufacturers will be able to hang on for a while or substitute beans from other producers.
However, that farmer strategy poses a problem. The humid climate makes it difficult to store dried beans for a lengthy period. Sooner or later, they will begin to rot. In addition, farmers need a steady revenue stream to handle their living expenses. The Guardian reported that at least some farmers ended up breaking the boycott because they needed to pay for their living expenses or worried that their crop would spoil. One farmer reported selling for CFA500/kg so that he could pay school fees for his children.
As I have said here before, we need a different strategy that offers farmers a living return for their crop. And that can only be created at the global level.
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