Ivory Coast Raises Cocoa Price for Farmers 10% From 2015

ABIDJAN (Capital Markets in Africa) – Ivory Coast, the world’s biggest cocoa producer, will boost the minimum price paid to farmers for their beans 10 percent from last year.

Growers will get a minimum 1,100 CFA francs ($1.86) a kilogram (2.2 pounds) for beans for the main crop starting in October, according to Abdourahmane Cisse, the country’s budget minister. That’s up from 1,000 CFA francs last season. The main crop runs from October to March.

“My own view is that prices are maybe a bit too high but it’s still totally sustainable,” Edward George, head of research at Ecobank Transnational Inc., said by phone from London.

Dry weather has hurt the crop after the Harmattan — dry winds that blow over West Africa from the Sahara desert — was the worst in three decades. Traders including Cargill Inc., Olam International Ltd., Sucres et Denrees SA and Armajaro have forecast large shortages in the year ending in September.

“The worry is that a lot of beans that have not been sold have stockpiled and now are going to be mixed in with the main crop to get rid of them,” George said. “I can imagine a lot of buyers are not very happy that the prices have gone up and they know that part of the cocoa they are going to buy is going to be sub-standard.”

Production dropped 13 percent to 1.565 million metric tons for the 2015-16 season, Bruno Kone, a government spokesman, told reporters in Ivory Coast. Exports for the season fell 4.9 percent to 1.548 million tons, Kone said.

Cocoa futures in London climbed to a six-year high in July as the Harmattan reduced output from the smaller of two annual crops in West Africa. Prices have dropped 4.5 percent in the past three months.

Poor bean quality is also affecting processing, with the Ivory Coast expected to lose its spot at the top cocoa processor to the Netherlands this year, according to the International Cocoa Organization. Grindings will be 510,000 tons in 2015-16, down 8.6 percent from a year earlier, Laurent Pipitone, director of economics and statistics division, said at a conference in London on Tuesday.

Cocoa for December delivery declined 1.5 percent to $2,825 a ton in New York Wednesday, extending the drop this year to 12 percent. It retreated 1 percent to 2,263 pounds ($2,945) a ton in London.

Source: Bloomberg Business News