Determined to influence global price of cocoa like the OPEC is doing with crude oil, the two leading cocoa growing countries, Ivory Coast and Ghana have decided to harmonise and regulate bean prices, and attract more revenue to themselves.
International analysts, Fitch Solutions is however arguing that the plans by the duo are unlikely to have much effect on world markets prices.
The analysts’ argument was that though two countries account for about 60 per cent of global output, the fact of the differences between their marketing systems and minimal domestic processing, would significantly limit their overall influence over international prices. The prices have actually stayed low in recent years due to overproduction.
Fitch analysis not withstanding, Ghana and Ivory Coast have struck a deal this month to coordinate their farmgate prices for the upcoming October-to-September growing season, for a collaboration meant to emulate the OPEC oil cartel.
Already, the African Development Bank last year agreed to provide 1.2 billion dollars to finance the harmonisation plan, which includes construction of modern storage facilities, farm rehabilitation and disease control.
Yet, Fitch Solutions insists that the collaboration would be difficult to achieve, citing wide differences in how Ivory Coast and Ghana export their crop, most of which leaves West Africa in a raw or semi-finished state.
“Though the countries’ influence on global supply and international trade is substantial … various structural barriers will inhibit their ability to manipulate the cocoa market,” the report said.
Talks between Ivory Coast and Ghana followed intense market volatility over the last two years. Ivory Coast was forced to cut farmgate prices sharply last season while Ghana incurred losses of at least 2 billion cedis (410 million dollars).
In order to effectively harmonise prices, Fitch Solutions said one of the countries would need to overhaul its market structure, but neither side had indicated it was prepared to make wholesale changes.
Ivorian farmers sell cocoa to international producers such as Barry Callebaut through state-organised auctions, meaning local prices are relatively responsive to global prices changes.
In contrast, Ghana’s Cocoboard buys the beans at a price set at the start of the season, which prevents farmers from selling to other buyers.
