Top Cocoa Growers Are Said to Mull Floor Price for Bean Sales

ACCRA (Capital Markets in Africa) – The world’s two biggest cocoa producers are considering setting a minimum price for their beans in a bid to derive more value from growing the chocolate ingredient, according to two people familiar with the matter.

The industry regulators of Ivory Coast and neighboring Ghana are in talks to study a price that will fall in a range of 1,700 pounds ($2,255) to 2,000 pounds per metric ton on a free-on-board basis, said the people, who asked not to be identified because they’re not authorized to speak publicly about the matter. The issue was discussed at meetings between Ghana Cocoa Board and Ivory Coast’s Le Conseil du Cafe-Cacao in Accra last week, said the people.

The strategy is at an early stage and both regulators are reviewing the implications of such a proposal for their industries, said the people. A final plan will be submitted for approval to the two governments and then presented to cocoa buyers, said the people. Ivory Coast wants to implement the plan before the October start of the next main harvest and will set aside a portion of the season’s future sales at the set price, said one of the people.

A spokeswoman for the CCC didn’t answer calls seeking comment. A spokeswoman for Ghana Cocoa Board declined to comment when contacted by phone.

London cocoa prices have averaged 1,652 pounds per ton since the beginning of the current season for most active contracts, compared with 1,487 pounds per ton a year ago.

Ivory Coast and Ghana, which account for about three-fifths of global cocoa output, typically sell about 80 percent of the main harvest before the beginning of every season, a system which allows it to lock in prices and set the minimum pay for farmers. Ivory Coast, the biggest producer, has already sold at least 500,000 metric tons of the next harvest from a target of 1.4 million tons, people familiar said earlier this month.

To be sure, past attempts to control the market by limiting or banning sales in Ivory Coast didn’t prove successful. That’s partially because traders know West African nations rely heavily on cocoa-export revenues and they eventually end up selling, in some cases at even lower prices.

The two countries have been trying to align their policies and share more information to improve their pricing power in the global market. Last month, Ivory Coast started to move away from a cocoa-auction system in favor of direct sales to traders, bringing the marketing process closer to that of its West African neighbor.

Source: Bloomberg Business News