ICCO warns of impact from flash floods upon cocoa sector

Flash floods in West Africa, including Ivory Coast, are believed to have further impacted on key cocoa growing areas, further affecting communities under pressure from cost of living inflation, reports Neill Barston.

According to the International Cocoa Organisation (ICCO), flooding has restricted transportation of crops – which have been trading at fluctuating value with downward momentum in recent years, further impacting farmers who are campaigning to the region’s governments to help enable a living income.

Consequently, exports have been affected by challenging environmental conditions, as well as major factors such as key hikes in fertiliser costs that analysts fear will severely impact on potential crop yields.

The situation across West Africa has been further complicated by illegal gold mining operations in Ghana on agricultural land, known as ‘galamsey,’ from the phrase ‘gather and sell,’ that has become a major issue in recent years, further threatening the sustainability of the cocoa sector.

As of 6 November, cumulative volumes of arrivals of cocoa beans in Ivory were reported at 348,000 tonnes, down by 23% year-on-year compared to 452,000 tonnes recorded during the corresponding period of the previous season.

Furthermore, ICCO noted that crops were likely to be further affected should torrential rainfall persist, as soil nutrients will be washed away, placing further pressure on the sector.

Surrounding this year’s World Confectionery Conference, Fairtrade International expressed major concern for what it described as a clear cost of living crisis for many cocoa growing communities, with progress made in recent years being further set back by the lingering impact of the Covid-19 pandemic.

As the ICCO noted, in neighbouring Ghana, while no fresh data were available on the level of volumes of graded and sealed cocoa beans for the 2022/23 season, the situation is being closely monitored as the country recorded a drastic cut in production compared to last season, due in part to the devastating effect of the Cocoa Swollen Shoot Virus Disease (CSSVD), illegal
mining on cocoa farms and reduced use of fertiliser due to the high prices.

Moreover, the recovering in grindings in 2021/22 on the back of the economic recovery from the COVID 19 pandemic, mixed results have been posted by members of the European Cocoa Association (ECA), Cocoa Association of Asia (CAA) and National Confectionery Association (NCA) – who held about 56% of the world share of grindings in 2021/22.

For the 2021/22 cocoa season, cocoa processing activities increased year-on-year in Europe and Southeast Asia, whereas they dropped in North America. On a crop year basis, the ECA posted data indicating that cumulative grindings in Europe during 2021/22 increased year-on-year by 2.68% from 1,434,631 tonnes to 1,473,084 tonnes, while the CAA published data showing a 4.79% increase from 863,239 tonnes to 904,597 tonnes.

However, total grindings in North America witnessed a year-on-year decline of 3.44% from 483,078 tonnes to 466,451 tonnes according to the total quarterly statistics published by the NCA.

More recently, the above-mentioned three regional cocoa associations released reports on volumes of cocoa processed during the third quarter of the 2022 crop year. On a year-on-year basis, in Europe, grindings declined by 1.53% to 369,679 tonnes during this quarter. Similarly to Europe during Q3.2022, cocoa transformation activities in North America contracted by 3.37% to 119,244 tonnes. However, cocoa processors in South-East Asia were reported to have increased the quantity of cocoa ground by 9.53% from 210,970 tonnes in Q3.2021 to 231,080 tonnes during Q3.2022.

The latest mixed grindings data suggest that cocoa demand at the start of the 2022/23 season remains uncertain due to the current global macroeconomic narrative on high inflation, interest rates, slow growth and concerns about energy price increases.

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