Ghana to maintain cocoa price, raising smuggling risk

9/14/2017 9:37:49 PM

Ghana's price higher than neighbouring Ivory Coast by about $500. 

Ghana will keep the price it pays farmers for cocoa unchanged if not higher next season, its industry regulator said on Thursday, raising the likelihood of rampant smuggling from neighbouring Ivory Coast, the world’s top producer.

Bumper crops in major cocoa producers have created a supply glut this season, with the International Cocoa Organization predicting a global surplus of 371,000 tonnes of beans.

The resulting decline in prices forced Ivory Coast to slash the price it pays farmers in March by 36 percent to 700 CFA francs kilogramme, or $1,290 a tonne.

But Ghana, the world’s number two producer, has kept its price unchanged at 7,600 cedis ($1,720) per tonne since October, and Cocobod CEO Joseph Boahen Aidoo said in an interview that lowering it next season was out of the question.

“As for the farmers’ price, it is non-negotiable ... We’re determined to at least keep it at current levels if we cannot increase it,” he told Reuters.

Officials from Ivory Coast’s Coffee and Cocoa Council told Reuters on Wednesday the marketing board was close to agreeing an increase in the minimum farmer price to 750 CFA for the 2017-18 season, which opens next month.

If both nations follow through with their plans, Ghana’s price would be at least $340 per tonne higher than Ivory Coast‘s, creating a major incentive for farmers and smugglers to traffick Ivorian beans across the border.

Industry observers estimate that 100,000 to 120,000 tonnes of beans were smuggled into Ghana in the current season after Ivory Coast lowered its cocoa price in March.

Ivory Coast sells its anticipated crop forward and uses the average sale price to fix its guaranteed price for farmers. Ghana secures a syndicated loan ahead of each season that it uses to finance purchases and Cocobod’s other costs.

Cocobod officials will sign next season’s loan, expected to be for $1.3 billion, in Paris on Sept. 20.

Aidoo said Cocobod had decided to impose budget cuts ranging from 5 percent to 50 percent depending on the operational component to put a maximum of resources towards bean purchases.

He did not say which activities would face cuts. In addition to bean purchases, Cocobod’s budget pays for roads, fertiliser and pesticide distributions, as well as administrative costs.

He said Ghana expected to finish the current season with production of 950,000 tonnes of beans, its highest output since the record 2010-11 season yielded 1 million tonnes.

“Overall, the goal is to increase productivity per hectare and boost national output,” Aidoo said.

Source: Reuters 

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