IVORY COAST – Ivory Coast has slashed the price it guarantees for cocoa farmers by 36 percent to 700 CFA francs ($1.14) per kilogram and reduced taxes for the April-to-September mid-crop amid a sharp drop in world prices, a government spokesman said on Thursday.
The world’s top producer sells forward the bulk of its anticipated harvest to be able to set a minimum price for farmers.
The price was fixed at 1,100 CFA francs/kg at the start of the current season in October.
However, futures prices on markets in London and New York have since plummeted following bumper crops in most of the world’s cocoa producers.
“It’s a large drop. The government is aware … The goverment is doing everything it can to ensure this price is respected,” Bruno Kone told reporters following a cabinet meeting in the commercial capital Abidjan.
In Ivory Coast, higher-than-expected output and export contract defaults by companies that wrongly speculated that prices would continue to rise have created a glut of beans and frustrated farmers who have struggled to find buyers.
In addition to encouraging purchasing, Kone said the government will also eliminate a 5 percent registration tax paid by exporters and reduce a number of smaller levies for the mid-crop.
“The government has sacrificed a certain number of budget resources. It’s important the population see that an effort is being made by the government to confront this relatively difficult situation,” Kone said.
The mid-crop is the smaller of Ivory Coast’s two harvests, and its typically smaller, lower quality beans are generally purchased mainly by companies with local grinding operations.
Since it introduced its forward sales system in 2012 the price paid to Ivorian farmers has risen steadily in line with a years-long trend toward higher world prices.
“Farmers aren’t going to like this. Going from 1,100 CFA francs (per kg) to 700 is a lot,” said Dieka Issa Ouattara, who farms near the village of Fengolo in Ivory Coast’s western cocoa heartland.
“We’re forced to take it. It’s like a new colonialism. It’s not forced labour, but it’s close,” he said.
The sharp drop in prices for farmers – which will likely create a discrepency with Ivory Coast’s neighbours, particularly number two producer Ghana – also risks encouraging cross border smuggling of beans.
“It’s such a blow for farmers. They’re pretty much back to square one,” said one Abidjan-based exporter.
“Of course it helps us buy the mid-crop, but it’s quite bad for the sector as a whole.”
($1 = 613.8500 CFA francs) (Reporting by Joe Bavier and Loucoumane Coulibaly; editing by Edward McAllister, Greg Mahlich)
March 31, 2017: Reuters