As Ghana and Cote d’Ivoire move to protect the interest of cocoa producers, both countries are currently co-ordinating their producer price plans for at least 60 percent of the cocoa price, based on the international (Free-on-Board) FOB price, to be given to it producers.
This was made known in an interview with the Director General of the Le Conseil du Café-Cacao, Mr Kone Brahima Yves, at the two-day stakeholder engagement on farmer income, in Accra on Tuesday.
The Director General said, “the 60 percent is the least we can propose and we can go higher.”
He stated that, “the two countries have been collaborating for the interest of farmers for the past eight months in order to define the minimum price that is acceptable to be given to our producers of cocoa.”
The collaboration is partly about curbing the motive for the smuggling of cocoa between the two countries which share an extensive, but poorly policed and porous border. Synchronized pricing on both sides would eliminate the financial motive for cocoa smuggling which has seriously affected the fortunes of both countries over time.
At the end of June 10, 2019 the ICCO daily price for cocoa beans was held at US$ 2,436.08 per tonne, a marginal increase over the US$ 2,394.07 per tonne as at June 07, 2019.
The two countries account for about 65 percent of the worlds cocoa production. However, it only receives only about 5 percent of the industry value – including chocolate production and sales – of US$ 100 billion.
In a bid to influence international market prices directly for the first time the two countries agreed to suspend the sale of cocoa beans to the open market under the 2020/2021 crop season until further notice. This is a bold, ambitious, move to curtail supply in order to raise market prices in similar fashion to how, for example, the Organization of Petroleum Exporting Companies (OPEC) uses production levels to influence the world market price for oil.
Under the arrangement for a floor price, the two countries have also agreed that none of them will sell their produce in the international market below the agreed minimum price.
Since September 2016, producers have suffered from the steep decline in world market cocoa prices. This has seen more than one-third of Ghana’s cocoa exports value wiped out between 2016 and February 2018, with a tonne of cocoa declining from US$ 3,000 to below US$ 1,900.
“The current low prices have forced strong production countries to reduce the farm gate price of cocoa since 2017 to reflect the world market trends,” said Joseph Boahene Aidoo, CEO of COCOBOD.
Early this year, the two leading growers of cocoa jointly rejected aspects of a global standard on cocoa production as inimical to the fortunes of smallholder farmers and the cocoa industries in the two countries in general.
They insisted that those aspects of the International Standardisation Organisation (ISO) 34101 Standards on Sustainable and Traceable Cocoa production would increase cost, make farmers and their farms vulnerable to third parties and generally impede production when finally implemented.
This marks one aspect of a new partnership that has the potential to entirely change the structure of pricing on world cocoa markets and indeed, if successful, could conceivably serve as a model for poor but natural resource rich countries to wrest control over – or at least significant influence – global market pricing from the rich countries that consume those commodities.