Ivory Coast cocoa output, the world’s largest, will be stuck below the record unless industry changes succeed, an analyst at Ecobank Transnational Inc. said.
Production will be capped below 1.4 million metric tons and last year’s record 1.5 million tons without reforms, barring extraordinarily favorable weather, Edward George, a commodities specialist at Ecobank, said in a report e-mailed today. Ivory Coast in January began cocoa auctions to ensure farmers get a guaranteed price for their beans. Export quotas on local and overseas traders are also being imposed, he said.
“The reforms are definitely a work in progress,” George said. “We’re working with a hedge fund that wants to completely reorganize the production side to increase yields, have training and set up cooperatives.”
Ivory Coast will need to have changes working before the 2012-13 crop starts in October or exporters, traders, buyers and farmers will back out, George said.
The country’s share of global cocoa production has declined from about 46 percent in 1999-2000 to 32 percent in 2011-12 as industry reforms failed and civil war erupted, and an increase in smuggling to neighboring Ghana, and Togo, undercut output, George said. Ecobank is based in Lome, Togo, and George has covered the cocoa market for eight years.
Ghana, the second-largest producer of cocoa, was able to raise a record $2 billion from banks to finance its cocoa industry last year, he said.
“Ivory Coast trees are old, they need replanting, they need an overhaul and they can’t leave it much longer,” George said. “All cocoa will have to be certified in 10 years. You’re not going to be able to be an international exporter if you do not have certified cocoa. Ivory Coast can’t guarantee that right now. Ghana can.”