CÔTE D’IVOIRE – Cocoa processing plants in Côte d’Ivoirere and Ghana have significantly cut back or completely halted processing due to soaring prices and supply chain issues, according to four different trading sources.
Transcao, an Ivorian processor and one of the largest plants in the country, announced it has ceased buying beans because of these soaring prices.
Although Transcao is currently processing from existing stock, it did not disclose the plant’s operating capacity.
Two cocoa industry sources revealed to the Cocoa Post that major state-run cocoa plants in Côte d’Ivoire could shut down. Additionally, it has been reported that major chocolate trader Cargill is struggling to source cocoa beans for its Ivorian processing plant.
In Ghana, most of the eight cocoa processing plants have suspended operations for weeks since price volatility intensified in October.
The state-owned Cocoa Processing Company (CPC) has also suspended operations, revealing to the Cocoa Post that it is currently operating at only 20% capacity due to a bean shortage.
This bean shortage has destabilized the long-established global cocoa trade system, which is heavily regulated.
Farmers typically sell beans to local dealers, who in turn sell them to global traders or local plants up to a year in advance. Local regulators set farmgate prices that farmers should charge for beans.
Global traders then sell the beans or processed cocoa products like liquor, powder, or butter to global chocolate companies such as Hershey, Nestle, and Mondelez.
During shortages, local dealers buy beans at a premium to the regulated farmgate prices to secure supply. These dealers sell the secured beans at higher prices on the spot market instead of delivering at pre-agreed prices.
Consequently, global traders are incentivized to purchase beans at these high prices to meet delivery obligations with big chocolate firms. As a result, many local processors are struggling to find cocoa beans.
Ghanaian and Ivorian authorities have attempted to protect local plants by offering cheap loans and capping the amount of beans global traders can purchase.
However, the current shortage and regulatory inadequacies have inhibited local processors’ access to beans, making it difficult for them to repay loans.
Industry sources predict a market correction around September, when harvests are expected to alleviate the pressure caused by the shortage.
Nonetheless, the International Cocoa Organization (ICCO) predicts global cocoa production will fall by 11% in the season ending September.
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