focus of attention, with the region's farmers being wooed by buyers to part
with their crop.The farmers on their part have through withholding their crop
and careful hedging tried to get the best possible prices in a jittery market,
where buyers are prey to serious supply concerns.
For once farmers, who had long become used to holding the
short end of the stick in the market, find themselves dictating terms. Traders
and manufacturers are running higher risks of settling for terms that might
result in huge losses.
For all players in the world market, West Africa has become the main
While Ivory Coast alone accounts for more than 40 percent of
global production with an average annual output of 1.1 million metric tonnes of
cocoa beans, more than 60 percent of the entire global crop comes from the same
region. Ghana contributes about 400,000 metric tonnes a year, followed by
Nigeria with about 180,000 metric tonnes and Cameroon with some 100,000 metric
tonnes yearly. Equatorial Guinea and Gabon produce smaller quantities.
After record lows in the past three years, cocoa prices were
indeed been on a rebound earlier in the year. But when mutinous soldiers in
Ivory Coast failed in a September 19 attempt to overthrow President Laurent
Gbagbo and quickly seized half of the country in what was shaping up as a civil
war, it was a major shot in the arm for cocoa prices. It came at the beginning
of the traditional three-month harvest season that lasts till December and
touched off record price highs immediately.
When the rebel soldiers briefly entered the cocoa industry
Daloa, in the country,s central region on October 12, prices
immediately touched 17-year highs of $2,405 per tonne in New York and GBP1,635
in London. A cease-fire signed by the parties on October 17 and subsequent
peace talks in the Togolese capital, Lome, have since caused a significant
decline in prices. But the ears of the market are still keenly gauging the
pulse of difficult negotiations.
By mid-November cocoa prices had dropped to a seven-month low
of $1,841 per ton in New York for December futures and GBP1,176 per ton in
London for March delivery. The main price driver had been anxious buying by
chocolate manufacturers who had taken short positions and were low on raw
material stocks ahead of Christmas holidays, a prime sales period. With peace
talks underway some of the anxiety eased while the market awaited a more
lasting peace deal.
But in the origin countries signs of market nerves were still
evident in the high farmgate prices buyers were still willing to pay. In Ivory
Coast where the cocoa regulatory authorities fixed 625 CFA per kilo as the
minimum price to be paid for cocoa beans during this year's harvest season,
prices in November still ranged between 750-800 CFA, down from over 1,000 CFA
the previous month. Most exporters still worried about the difficulties of
transporting cocoa to the coastal ports due to persisting insecurity.
Ghana, the only country in the region yet to liberalise cocoa
sales, raised its local prices close on the heels of the start of the Ivorian
conflict. Officials said the aim was to discourage widespread smuggling of the
country,s cocoa to neighbouring Ivory Coast in search of higher prices. The
move pleased Ghanaian cocoa farmers.
In Nigeria farmgate prices for a tonne of cocoa in
mid-November dropped to around 200,000 naira from 250,000 naira a month
earlier. But most traders and farmers reported that little stock was changing
hands after heavy sales in October put a lot of the produce in the hands of
large buyers and exporters. Most
buyers were also playing the waiting game to see if a peace deal in Ivory Coast
might lead to further price decline.
Industry experts have no doubt that the last two cocoa seasons
(2001/2002, 2002/2003) belong to the cocoa farmers. But they also think the
situation will invariably prepare the grounds for a downswing in prices towards
record lows in the next couple of years.
"Peak prices always provide the incentives for over-production
in subsequent years," said Terence Hill, a London cocoa market analyst. "Once
the market becomes awash with the goods it's only natural that prices will take
Hill's argument is given credence by the fact that key west
African producers, including Ghana, Nigeria and Cameroon, have plans to
increase production in the coming years. Ghana's immediate concern is to regain
the second spot after Ivory Coast, which it recently lost to Indonesia. The
Nigerian government has a new policy to bring more land in the southern cocoa
belt under cultivation with new varieties of the crop that have shorter
maturity period. Cameroon plans to double its production in the next few years.
a lot will depend on what happens in Ivory Coast both in the short
and the long terms. If the current wave of instability and
accompanying xenophobia persists, the exodus migrant workers from
neighbouring countries, that form the backbone of its cocoa
production, will continue. In such a situation the output of the
world's current top producer will continue to decline. "In that case
there is a chance that other producers might still be able to cash
in on their expanding output," said