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Arm wrestling continues between African cocoa giants and industry

World Cocoa Day marks the beginning of the harvest in Ghana and Côte d'Ivoire. But it is the price floor next year that concerns the entire industry.

This is not the new West African crop that worries the cocoa sector. The rains fell at the right time. Nearly 1.7 million tons of beans are expected in Côte d'Ivoire by March 2020 and a producer price up from 750 to 825 CFA francs, given the positive trend in world prices in recent months.

Industry is dragging its feet

This is the next harvest, which will be launched in October 2020, and for which Ghana and Côte d'Ivoire have imposed a floor price of $ 2,600, which is in everyone's head. Its marketing, which is still at least a year in advance, should normally be in full swing. However, only 20 to 30,000 tons of beans have been sold; in Ghana, it is estimated that only 40,000 tons are traded in Côte d'Ivoire. Against 300 000 tonnes last year at the same time, at the world's largest producer.

risks

The goodwill that the chocolate industry posted this summer is slow to materialize. As long as they do not have the guarantee of being able to pass on to the consumer, that is to say on the large distribution, the possible additional cost, compared to the futures market, the big chocolatiers as the traders drag their feet.
Especially since this extra cost can vary enormously, 140 pounds between the futures market and the floor price in March, to 450 pounds in October 2020. Buyers do not want to end up with excessive positions where they would take risks .

Play on the original premium?

The standoff therefore continues between the new cocoa OPEC and downstream of the sector. Negotiations are currently on a relaxation by the producing states of their original premium, 120 pounds in 2020 for cocoa from Côte d'Ivoire, 210 pounds for the Ghanaian origin. An easing that would amortize the cost of the "vital income differential" required by Ghana and Côte d'Ivoire, from 2020, or $ 400 per tonne, intended for producers.

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