Cocoa

Cote d’Ivoire lowers guaranteed price paid to its cocoa farmers, while demanding more output

By Anthony Myers contact

- Last updated on GMT

Cote d'Ivoire is reported to be pushing for an increase in the domestic processing capacity from its cocoa.
Cote d'Ivoire is reported to be pushing for an increase in the domestic processing capacity from its cocoa.

Related tags: Cocoa, Icco

Latest ICCO Monthly Cocoa Market Review suggests the LID is pushing grinders to source from other countries.

Cote d’Ivoire, the largest cocoa growing country in the world, has lowered the guaranteed price paid to its cocoa farmers by 9% to $1.35 a kilogram, while pushing for an increase in the domestic processing capacity to 1.2 million tonnes within two years.

As cocoa futures traded approximately $2,400 per tonne in April, near a five-month low of $2,347 per tonne reached at the end of March on higher supply, concerns on the market over subdued demand in Europe remain as the continent struggles to curb rising coronavirus infections.

Reports from Abidjan, the capital of Cote d’Ivoire, suggest weekly arrivals of the commodity in its ports are at a 12-month high, while above-average rains have bolstered expectations for a strong April-September mid-crop.

In its latest World Cocoa Market Review for the month of March 2021​ issued by the ICCO, it reported that Ghanaian and Ivorian cocoa is less attractive to grinders because of the Living Income Differential (LID) that adds $400 a tonne to the price to support the industry’s poorest farmers.

There are also reports that front-month (futures) cocoa contract prices in London and New York plunged by 13% and 14% respectively.

The ICCO also acknowledges that 2020-21 crop sizes of Cote d’Ivoire and Ghana are currently higher year-on-year and that European certified stocks increased by 21% while a 31% rise was recorded in certified stocks in the United States, thanks to gradings that occurred during March on the Exchange.

In March 2021, stocks with valid certificates in European warehouses averaged 95,321 tonnes - representing 63% of total certified stocks, the ICCO’s review showed. Compared to the average level of 154,005 tonnes seen during March 2020, European certi­fied stocks declined by 1.7% to 151,406 tonnes in March 2021. For the US, certified stocks moved up from an average of 5,101 tonnes in March 2020 to 41,680 in March 2021.

It is worth noting that, 52,860 tonnes of cocoa beans were tendered against the March 2021 contract in Europe. This volume is by far higher compared with the 6,130 tonnes physically delivered against the March 2020 contract a year ago. This is an indication that grinders prefer to source their cocoa from non-LID origins​,” The ICCO stated.

Origin differentials showed signs of halting from pronounced drops on both sides of the Atlantic. Focusing on the European market, the differential over Ghanaian cocoa stood at US$488 per tonne in March 2021, down by 27% compared to US$672 per tonne recorded in October 2020. Similarly, the origin differential declined by 44% from US$527 to US$295 per tonne for Ivorian cocoa beans.

A 59% plunge from US$390 to US$161 per tonne was recorded for the Nigerian cocoa country differential, while Ecuador’s differential fell slightly from US$472 to US$415 per tonne.

Additional source: https://tradingeconomics.com/commodity/cocoa

Related topics: Commodities, Cocoa & Sugar

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