Ivory Coast could see roughly 200,000 metric tons of main-crop cocoa remain unsold when harvesting concludes at the end of March unless the government reduces the state-regulated prices paid to farmers, industry experts and executives at global trading houses say.
The West African nation and neighbouring Ghana together account for about 50% of the worlds cocoa supply. Over recent months, unsold volumes from the main crop have built up both inland and at port facilities as a result of a price gap between domestic farmer prices set last October and prevailing world market levels. That divergence has deterred many international buyers, who would incur steep losses on purchases at the government-set rates, contributing to a collapse in world cocoa prices that have fallen 50% so far this year and touched nearly a three-year low.
Despite the pullback by many international traders from the main crop, some transactions have gone ahead for the upcoming mid-crop. Local trade and government sources reported that about 200,000 tons of beans expected for the April-September mid-crop were sold last week to international traders. The mid-crop is typically processed within the country and generally trades at lower prices because it is viewed as lower quality.
In late January, in an effort to get cash into the hands of farmers who had not yet been paid for main-crop deliveries, the Ivorian government pledged to purchase 100,000 tons of unsold cocoa at a cost of around $500 million. Even so, executives at global cocoa trading houses and other experts believe the volume the state would need to acquire is likely to be substantially higher than that pledge.
Executives at global agricultural commodity traders, speaking on condition of anonymity because they were not authorised to speak publicly, said Ivorian traders - the middlemen who buy from farmers and sell to international buyers - have defaulted on at least 100,000 tons of main-crop cocoa purchases. Those same executives added that farmers are due to harvest a further 100,000 tons of main-crop beans by the end of March that have not yet been sold and likely will not be if the government does not lower its offered prices.
The Coffee and Cocoa Council (CCC), the Abidjan-based regulator charged with oversight of the cocoa sector including setting farmer prices, described the market estimate of unsold stocks as "erroneous" but did not provide additional detail.
Ivory Coast's agriculture minister said on Monday the government would announce the farmer price for the upcoming mid-crop by the end of February, a move made more than a month earlier than is customary. Separately, sources said last week that Ivory Coast is considering trimming its farmer price to align with measures taken in Ghana, which last week cut its farmer price by almost a third after farmers reported they had not received payments since November.
Summary
Unless state-controlled farmer prices are reduced, Ivory Coast could accumulate about 200,000 tonnes of unsold main-crop cocoa by the end of March. The higher domestic prices set last October, relative to steep declines in world prices, have discouraged many international buyers and contributed to a significant global price slump. The government has pledged to buy 100,000 tonnes to alleviate farmer cash shortfalls, but market participants warn that actual unsold volumes could be considerably larger.
Key points
- Approximately 200,000 metric tons of main-crop cocoa may remain unsold by end-March unless farmer prices are lowered - impact on commodities markets and agricultural sector.
- Ivorian and Ghanaian output together represents about 50% of global cocoa supply, and the unsold stocks are contributing to a 50% drop in global cocoa prices this year - impact on commodity prices and food processing sectors.
- The government pledged to buy 100,000 tons of unsold cocoa for about $500 million, but market participants expect the volume to be higher, affecting public finances and domestic trade operations.
Risks and uncertainties
- Failure to reduce state-set farmer prices could leave an estimated 200,000 tons unsold, increasing storage pressures at inland and port facilities - risk to ports, logistics, and storage infrastructure.
- Defaults by Ivorian traders on at least 100,000 tons of purchases, combined with an additional 100,000 tons due from harvest, create financial strain for traders and unpaid farmers - risk to local trade financing and farmer incomes.
- Any divergence in policy responses between Ivory Coast and Ghana, such as differing farmer price adjustments, could influence cross-border trade dynamics and price alignment - risk to regional market stability and price discovery.
Note: Where sources or market participants are cited, they spoke under conditions that limited attribution. The Coffee and Cocoa Council called the unsold stock estimate "erroneous" without elaboration. The agriculture minister set an earlier-than-usual timetable for mid-crop price announcement, and sources reported consideration of a price cut to mirror Ghanas recent reduction.