(Agrimoney) – Ivory Coast’s reign as the world’s top cocoa processor may prove short-lived, with an export tax, besides power hiccups, to prompt a “slump” in its grinding volumes this year, Ecobank has warned.
The Africa-based bank forecast cocoa grinding in Ivory Coast, which is also the top cocoa producing country, falling to 500,000-540,000 tonnes in 2014-15, from last season’s record 570,000 tonnes.
“Unfavourable conditions”
The forecast “reflects the unfavourable conditions weighing on the sector, especially changes to the fiscal regime over two years ago that led to a 25% increase in the export tax”, named Droit Unique de Sortie, Ecobank said.
The drop in grindings could demote Ivory Coast back behind the Netherlands in the world cocoa processing league, and interrupt a long shift in processing from major consuming regions to producing countries, a trend which has also favoured Indonesia.
The International Cocoa Organization has forecast Dutch processors grinding some 529,000 tonnes of cocoa this season.
“Grindings slump”
The Ivorian government, which has a target of processing half of domestic output, “will need to make concessions” on the export tax to achieve its aim, Ecobank said, forecasting that this season the grinding level will reach 29-32%.
“Since the beginning of this year, the majority of the country’s grinders have been grinding an average of 40,000-45,000 tonnes per month,” the bank said, naming the likes of Barry Callebaut, Cargill and Olam International among the big processors.
“Grindings slumped to 37,000 tonnes last month, owing to disruptions to the power supply in Abidjan,” the Ivorian capital.
“High costs”
Operators have also been undermined by the price for smaller, lower-grade beans exceeding in number 121 per 100 grammes, which are offered to domestic grinders at a discount in order to stimulate the Ivorian processing industry.
The discount was increased this year, but may not be large enough to support domestic grinding.
“High costs have hit small-scale grinders hard,” Ecobank said.
Sucso, which was processing for Cemoi, has shut down operations, and the bank cautioned of further potential cutbacks as Olam digests cocoa operations purchased from US agricultural commodities giant Archer Daniels Midland.
“Olam’s acquisition of ADM, which has practically stopped grinding this season, could cut overall grinding levels, as it remains unclear if Olam will keep ADM’s Abidjan factory in operation.”
