Exporters launch price war for Ivory Coast cocoa supplies
ABIDJAN - Cocoa exporters in top producer Ivory Coast are paying high premiums to suppliers in an effort to secure scarcer beans and fears that especially harsh Harmattan weather could make things ever worse.
After a solid start to the 2015/16 season, arrivals at Ivory Coast’s ports of Abidjan and San Pedro have fallen behind last year’s levels, raising concerns among exporters that they will struggle to fill contracts.
Exporters said on Monday that port arrivals fell to 58,000 tonnes over the last week, down from 69,000 tonnes during the same period last year.
“The big guys are paying 30 to 50 CFA francs ($0.05-$0.08) per kilogram above the pricing scale,” said the director of a European exporter based in San Pedro.
Under Ivory Coast’s forward sales system, the government has fixed a guaranteed price of 1,088 CFA francs per kg this season for cocoa arriving at exporter warehouses at the ports.
Ivory Coast brought in a record harvest of around 1.8 million tonnes in 2014/15, however industry sources predict a significant drop in output this season.
ECOM Agrotrade Ltd, which focuses primarily on trading cocoa, coffee and cotton, told Reuters last week that a drop in Ivorian production would lead to an overall deficit of 183,000 tonnes.
The earlier than expected arrival of seasonal Harmattan winds in Ivory Coast and number two producer Ghana has raised concern that poor output from the April-to-September mid-crop could add to the supply shortfall.
Expectations of scarcity have driven up cocoa prices and exporters predicted they would climb further as would Ivory Coast’s origin differential.
“Everyone is expecting a bad crop, so we’re also expecting a rapid explosion in the differential,” said one European trader. “We all want to be covered and so we need a maximum of stocks before the beans start running out.”
The Coffee and Cocoa Council, Ivory Coast’s marketing board, removed this season a 15 CFA franc per kg limit on bonuses exporters are allowed to pay merchants to secure stocks. It also repealed a cap on the volumes subject to bonuses.
“This war between the exporters suits us fine,” said Coulibaly N’Golo, a middleman from the town of Soubre. “Monday we delivered three trucks to San Pedro and got a 40-CFA franc bonus ... We’re buying cocoa to deliver but there isn’t much.”
The big losers amid the increasingly aggressive competition have been small domestic exporters who cannot match the ever larger premiums paid out by the bigger players.
“We haven’t been able to get any cocoa for a week now,” said the head of a small Ivorian export firm. “A merchant came to me yesterday and handed me back my money. He preferred to deliver to a big exporter who paid 45 CFA francs above the price scale.” ($1 = 597.6300 CFA francs)
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