Downward pressure on Ivory Coast cocoa prices contrasted by Ghana’s stability

The International Cocoa Organisation’s latest monthly market analysis has highlighted the reduced ‘farm gate’ price being paid to farmers in Ivory Coast, wiping out the effect of the recently introduced Living Income Differential scheme supporting producers, writes  Neill Barston.

As the ICCO noted the mid crop season beginning in April resulted in the Ivorian government reducing payments to farmers by 25%, to $1.35 per kg of cocoa, with volumes standing at 1.78 million tonnes for the 20/21 year, up 2.8%.

Notably, exports of beans during October 2020-February 2021 stood at 882,852 tonnes, down 12% year-on-year, with reported weakened demand in key European markets, with any potential gains from the $400 per tonne of coca under the new LID scheme now effectively being voided by the dip in prices.

Significantly, neighbouring Ghana appeared more stable, with 748,162 tonnes recorded for the period, up 12% (From 664,328 tonnes a year earlier). Crucially, the country is currently maintaining its farm gate price for the 2020/21 mid-crop at the same level announced for the main crop at GH¢10,560 (US$1,837), and in fact stands to gain from the recently introduced LID payments.

The overall picture of uncertainty was also reflected in the New York and London ICE Futures cocoa commodities trading performance results. This saw the front-month contract prices drop by 13% and 14% respectively.

From 17 March onwards, the first position contract (MAY-21) prices continued to decline over the second half of the month under review. Meanwhile London, a 3% plunge to US$2,337 was recorded while in New York prices tumbled by 6% to US$2,354 per tonne.

Significantly, the overall position of a downward trend in cocoa prices during March was driven by various factors. On the one hand, the announcement of new lockdowns in Europe in response to the third wave of the COVID-19 pandemic, which has been harmful for the global economy, was detrimental to cocoa prices.

On the other hand, production in Côte d’Ivoire and Ghana were reported at higher levels compared to the preceding season. Furthermore, the U.S. dollar appreciated by 2% and thereby exerted a downward pressure on futures prices.

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