Stakeholders in the cocoa industry have questioned the rationale for the world’s two largest producers of cocoa,Ghana and Cote D’Ivoiren determining floor price for the commodity in the international cocoa market.
Acknowledging that cocoa farmers have remained poorly remunerated in the global cocoa economy, they, however, queried the unilateral decision of the two countries to fix what is termed as ‘floor prices for cocoa beans’.
Cocoa Association of Nigeria (CAN) President, Mr. Sayina Riman expressed concern that the decision of the two countries, without prior consultation with other producing countries could portend unintended grave distortions in the global cocoa economy.
He described the move as rather precipitate and non-sensitive to the needs of other cocoa producing countries.
Few weeks ago, the governments of Ghana and Cote D’Ivoire, which account for about 67 per cent of the global bean output, announced that effective from the 2020/2021 cocoa year, the minimum or floor price set for cocoa beans shall be $2600 per metric tonne. They noted that if the terminal market price fell below $2,600, both countries were prepared to withhold beans.
According to Riman, who is also the Vice President of the World Cocoa Producers Organisation, as good as the initiative may be, it lacks the support of other producing countries.
He noted: “The decision was taken unilaterally by the governments of the two countries without even consulting with the producers and other private sector stakeholders in both countries, let alone other producing countries’ governments and private sector”.
The Nigerian cocoa community leader stated that though $2,600 per tonne looks better than some of the ridiculous and slavish prices that are often below $1500 per tonne, “it is still a far cry from should be the bench mark prices based on production cost.”
Riman added: “We have been in talks with buyers to get a reasonable price for cocoa beans, but this is not to be done without inputs from other stakeholders in the value chain.”
Riman drew attention to a previous initiative in the early 1960s championed by the governments of Nigeria and Ghana, then the two largest producers.
He noted that in contrast tothe 1962-63 move, which produced the Cocoa Producers Alliance, the first International Cocoa Agreement and the establishment of International Cocoa Organisation, this latest move did not havethe buy-in of the other critical stakeholders.
Riman asked if both countries had the capacity in terms of structures and funding to withhold stocks and not create greater problems for producers. “Do they have the money and the warehouses to pay for and store the three million tonnes that are produced yearly? Will they not create more problems for the producers that will make farmers lose more money than is intended? How do they hope to pay for the beans? Is it with the $1billion loan from the Africa Development Bank? How far can that go? Will they be able to cope with the distortions that this move may cause for economies of other producing countries?’’ Riman queried.
He added: “What, if any, palliatives do they hope to offer farmers and other stakeholders in their respective countries’cocoa value chains, let alone other countries? What support mechanisms are put in place? Have they gauged the capacity of countries like Sao Tome and Principe, for instance, that depends substantially – over 80 per cent on cocoa income to fund national budgets?”
The WCPO Vice President lamented that both countries could not see the deception in the reported buyers’ almost automatic acceptance of the floor price as a trap.
“How many of the major buyers were represented in the purported acceptance? Only a few months back in Berlin, buyers were still holding their hardline position of market forces and all. How did they suddenly become born-again to so swiftly accept the so-called floor price?” he quipped.
Riman stated that the WCPO is in consultation with critical stakeholders to make a statement on the development and would come up with a uniform position in a couple of days.
“We are consulting. We shall address the world about our position very soon. What you will hear, I can assure you, will not be in tandem with the position of the two producing countries’ governments, though?’’ he added.
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