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Second successive cocoa production shortfall supports prices

04 May 2014

In March 2014, the International Cocoa Organization (ICCO) forecast a shortfall in cocoa production for the 2013–14 season to 115,000 tonnes less than consumption. This follows a production shortfall in 2012–13 of 174,000 tonnes. While overall cocoa production is projected to increase (+4.1% to 4.10 million tonnes), it is not keeping pace with the continued expansion of demand (which is forecast to reach record consumption levels of 4.18 million tonnes for 2013–14).

In March, further warnings of a possible El Niño weather phenomenon and possible drought in West Africa and south-east Asia served to further support cocoa prices, which TheFinancial Times noted had “rallied 8% since the start of the year to levels not seen since September 2011”. This followed a reported 21% increase in cocoa prices in 2013. But despite a strong start to the Ivorian cocoa season and the release of stocks held by farmers and traders (in the expectation of higher prices), production did not increase as rapidly as expected, with problems in countries such as Indonesia and Cameroon, and the spread of Black Pod Disease from Cameroon into Nigeria.

In West Africa, the minimum price established for cocoa beans in Côte d’Ivoire, coupled with a weakening of the value of the Ghanaian cedi since November 2013, is reportedly fuelling smuggling of cocoa to Côte d’Ivoire, with an estimated 40,000 tonnes of beans involved, according to Reuters. This reverses an earlier smuggling trend in 2010–11, when 200,000 tonnes of cocoa was smuggled from Côte d’Ivoire to Ghana. The Ivorian cocoa authority “announced at the start of the 2013/14 season that it would open discussions with Ghanaian authorities on how the two countries could work together to combat illegal trafficking”.

In Ghana, by 19 December 2013, cocoa purchases were up 37% on the equivalent period in 2012, suggesting a good start to the season in Ghana.

The ICCO also forecast growth in European grindings of 2% (to 1.61 million tonnes) for 2013–14, and a 20,000-tonne increase in grindings in Indonesia, taking Asian grindings to 275,000 tonnes. Côte d’Ivoire, meanwhile, is expected to cement its position as “the second biggest processing country, behind the Netherlands”. In 2012/13, Côte d’Ivoire’s cocoa grind reached “an unprecedented level of 471,000 tonnes”, and further growth is expected this year with the opening of a processing plant in San Pedro.

In Cameroon, despite current production difficulties, investment is under way to expand the country’s processing capacity for cocoa butter and cocoa powder, with a new 16,000-tonne facility set to come on stream to supplement the existing 25,000-tonne capacity. The government hopes to process “around 50,000 tonnes of cocoa in 2014”, out of total national production of 230,000 tonnes.

Editorial comment

There is common agreement among government and cocoa industry officials that increased cooperation between Côte d'Ivoire and Ghana is necessary. While two meetings took place during the 2012/13 season, a third, scheduled for December, was postponed. However, the deputy managing director of the Côte d'Ivoire Conseil du Café-Cacao (CCC), Edouard N'Guessan Kouassi, has expressed the view there is no need for a formal structure for dialogue.

Currently there are four major items on the agenda for discussion between the CCC and the Ghana Cocoa Board (Cocobod). Two of these relate to quality standards and norms, and coordinating a position in response to evolving EU import standards.

The third item for discussion relates to sustainability certification and promoting a common approach among Rainforest Alliance, Fairtrade Foundation and UTZ Certified in how they deal with Ivorian and Ghanaian producers. Currently, while the principles being applied are quite similar, their application on the ground is quite different. Cocobod, which has a long experience in certified cocoa, maintains a close eye on the whole chain of certified cocoa, whereas the CCC has a less defined approach. The CCC would like to draw on the Cocobod experience to establish a stronger regulatory framework for certified cocoa.

The fourth major item relates to the countries’ common aim of reducing cocoa smuggling. Cocobod has launched an investigation, but greater cooperation is needed. Recent price convergence has reduced profits, and the greater harmonisation of standards and certification processes should serve to avert the loss in reputation resulting from the smuggling, but far closer policy harmonisation is likely to be required in order to prevent smuggling from undermining national efforts to strengthen the functioning of cocoa supply chains. 


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