Dec. 23 (Bloomberg) -- Higher cocoa prices paid to farmers in Ghana and political instability in Ivory Coast has reversed a smuggling trend between the world’s top two producers of the chocolate ingredient that cut Ghana’s official output last season.
Between 75,000 and 100,000 metric tons of cocoa have been smuggled to Ghana from Ivory Coast since the 2010-11 harvest began on Oct. 1, Steven Haws, an analyst with New York-based Commodities Risk Analysis, said in an interview from the city on Dec. 21. Between 30,000 and 50,000 tons has been smuggled into Ghana, Jonathan Parkman, joint head of agriculture at Marex Financial Ltd., said in an interview from London, where the company is based, yesterday.
In times of high international prices, cocoa farmers in Ghana, where fixed prices are paid for beans, seek better earnings in markets with fewer controls such as neighboring Ivory Coast.
This season, “roadblocks, lawlessness and delays raise the transport costs of bringing cocoa to the ports of Abidjan and San Pedro” in Ivory Coast, Haws said in a separate e-mailed response to questions. The shift has resulted in the rise in the illegal trade from Ivory Coast to Ghana.
The Ghana Cocoa Board, which regulates the industry in the world’s second-largest grower of the beans, said Sept. 28 it would increase prices paid to Ghanaian farmers by 33 percent to 3,200 cedis ($2,169) per ton. Ivory Coast’s average farmgate price for the week ending Dec. 12 was 850 CFA francs ($1.69) per kilogram, or $1,690 per ton, according to the country’s cocoa and coffee exchange, which is based in Abidjan. Cocoa for march delivery rose 1.9 percent to 2,048 pounds ($3,154) a ton as of 4:13 p.m. local time on London’s Liffe exchange.
Refusal to Cede
Ivory Coast’s Laurent Gbagbo has refused to cede power to rival Alassane Ouattara, who was named winner of a Nov. 28 vote by the country’s electoral commission and has support from the U.S., United Nations, European Union and former colonial ruler France. Gbagbo has the backing of the army after the Constitutional Council dismissed the vote count in some northern areas, where Ouattara draws much of his support, and named him as victor.
Ghana’s higher price had begun to reverse the flow of illegal cocoa smuggling in the region even before Ivory Coast’s disputed vote, Haws said.
Ghana lost about 100,000 tons of beans to smuggling during the 2009-10 season, worth $300 million, Alhaji Dramani Egala, deputy chief executive officer of the Ghana Cocoa Board, said Aug. 27. The cocoa harvest year in both Ivory Coast and Ghana typically begins in October.
“I think it’s pretty clear up until recently that the economic benefit of moving cocoa from the Ivory Coast to Ghana has been significant, with the recent political turmoil it’s become even more significant,” Marex’s Parkman said. “At the moment, moving cocoa, even finding buyers around Abidjan has become difficult.”
Ivorian cocoa may not meet Ghana’s quality standards, Haws said.
“When cocoa is smuggled from Ivory Coast, it is common that Ivorian and Ghanaian beans are mixed to just barely pass the more stringent Ghanaian specifications,” he said.
“Ghana cocoa is of premium quality and we wouldn’t want any Ivorian cocoa,” Tony Fofie, chief executive officer of the the cocoa board, said in an interview from his mobile phone yesterday, denying that there has been a surge in smuggling.
The Accra-based board has raised its production forecast for 2010-11 by 14 percent to 800,000 tons, Fofie said, citing an “increase in yields from very good rainfall and some of the programs we’ve put in place” to improve growing practices.
To contact the reporter on this story: Jason McLure in Accra on email@example.com
To contact the editor responsible for this story: Antony Sguazzin firstname.lastname@example.org.