Cocoa Campaign Briefing

Cocoa market trends review.
By Stanislas Zézé, CEO of credit rating firm Bloomfield Investment Corporation

Ivory Coast’s 2018/2019 cocoa campaign commenced on 01 October 2018, and cocoa-bean production for the period is expected to increase to approximately 2.2 million tonnes. By 24 February 2019, total cocoa volumes arriving in the country’s ports amounted to 1.469 million tonnes, bettering the same period in the previous season by 9.38%. Producer sales prices have been set at FCFA 750 (approx. $1.29/€1.14) compared with FCFA 700 (approx. $1.21/€1.07) for the previous 2017/2018 period.

Notable this season, and in line with the Ghanaian situation, Ivory Coast’s industry regulatory body, the Coffee-Cocoa Board, is expected to sell 400,000 tonnes of cocoa beans (roughly one fifth of the annual harvest) directly on the international market. This is unusual given that since the 2012/2013 campaign, international cocoa bean sales have occurred within an auction system of maturity-linked export rights. Although the country’s authorities have not made any clear statements over the new initiative it would appear that Ivory Coast is looking to emulate Ghana’s regulatory system, which is generally considered to be more resilient to shocks. To recall, since 2017, when prices fell some 40% over the course of 18 months, both Ivory Coast and Ghana decided to strategically align in order to gain more traction on the international cocoa market.

Furthermore, the banking sector is unlikely to be eager to lend to the industry’s actors. Ivory Coast’s financial sector has been hit hard by various events over recent years, including a dramatic fall in 2016/2017 cocoa prices, a series of non-performing contracts, and, in the second half of 2018, the country’s primary exporter, SAF Cacao, entered into liquidation with heavy debts of some FCFA 150 billion (approx. $259 million/€228 million).

Finally, at international level, some analysts are expecting 2019 world cocoa prices to reach approximately 2% more than the average for 2018, which would be positive both for the nation’s cocoa industry as well as its trade balance.