Hike in Ivory Coast cocoa price puts pressure on Ghana

(Agrimoney) – Ivory Coast upped the guaranteed minimum price paid to cocoa farmers, as the world’s largest grower reports a record crop.

Ivorian president Alassane Ouattara on Thursday announced the farmgate price, which is be paid by the country’s government cocoa body, will rise to 1,000 CFA francs ($1.70) a kilogram.

This is a boost of 18% from the 850 CFA francs a kilogramme set during the 2014-15 season.

Ivory Coast sets the farmgate price based on forward sales of the cocoa crop.

Pressure on Ghana

The hike in farmgate prices was widely anticipated, as cocoa prices have bucked bearish agricultural commodity trends over the last year.

The move will put pressure on Ghana, the world’s second largest producer, to raise prices.

Ghana borders the Ivory Coast, and cocoa smuggling has been a problem in past years, as the falling Ghanaian currency shrinks the real-value of the farmgate prices paid by the domestic cocoa body.

Beans are moved through illegal channels to farmers in the Ivory Coast, who can then sell them for Ivorian guaranteed price.

On Wednesday Reuters reported that that a government committee in Ghana had recommended that the farmgate price be hiked to 425 cedi ($113.5) a 64-kg bag, from 350 cedi a bag last season, a 25% boost.

The move would leave prices slightly above Ivorian levels, as long as the exchange rates remain stable.

Successful reform

Ivorian agriculture minister Mamadou Sangafowa Coulibaly said separately on Wednesday that the Ivory Coast had harvested around 1.8m tonnes of cocoa in the previous season, which ended yesterday, exceeding 2014-15’s record harvest of 1.74m tonnes.

Mr Coulibaly hailed the result as evidence of the success of a reform programme of the sector.

“Production went from 1.4m tonnes before the reform to 1.8m tonnes this year, an increase of 20%,” he said, at a ceremony marking the start of the new season.

Political disruption

The flat minimum price system has been in place since the Ivory Coast reformed its cocoa sector in 2011, after the industry was disrupted by a violent political crises when Mr Ouattara’s predecessor refused to step down following electoral defeat.

Prices of cocoa spiked when Mr Ouattara cut off cocoa exports, in an attempt to prevent money from being sales reaching his rivals.

Ivory Coast again goes to the polls this month, with Mr Ouattara, a former deputy managing director of the IMF, expected to be returned.

Licences granted

This week the Ivorian cocoa body announced the list of approved cocoa exporters.

Export licences were granted to 113 companies and co-operatives, up from the 80 licences granted last season, including major names such as Cargill, Barry Callebaut and Olam.

But Sucres et Denrees, a major French commodities trading firm, was not granted a licence, having held one last year.

Legal dispute

Sucden is engaged in a legal dispute with its local partner for the previous season, Africa Sourcing.

Africa Sourcing is run by Loïc Folloroux, the son of the Ivory Coast’s first lady.

In a statement late on Tuesday, Africa Sourcing said there was “absolutely no link” between Sucden’s exclusion from the CCC list and the arbitration process, and denied that the company enjoyed any preferential treatment.

Sucden could not be reached for comment on Thursday.