Oct. 5 (Bloomberg) -- Cocoa growers in Ivory Coast, who will earn 8.7 percent more for their beans this year, may put more money into their farms to boost output after poor weather cut production in the last harvest, farmers’ groups said.
A minimum farmgate price was set at 725 CFA francs ($1.43) a kilogram (2.2 pounds) for the season that started yesterday, more than the average of 667 francs earned last year, according to the Coffee and Cocoa Council. It’s the first time in more than a decade that farmers will get a guaranteed amount after the government scrapped a system which set an indicative rate.
“The higher price and the fact it is guaranteed may encourage farmers to invest more in their farms,” Moussa Zoungrana, head of a group of cocoa-farmer cooperatives, said by phone from Guiglo yesterday. “They may decide to extend their farms, plant new variety of seeds or better treat their plantations with fertilizers and pesticides.”
Ivory Coast, the world’s biggest cocoa producer, introduced changes in its cocoa industry last year, including a plan to sell most of the beans before the actual harvest and a move to guarantee farmers a minimum fixed rate for their beans. The West African nation relies on cocoa and oil for its biggest sources of foreign currency.
Cocoa production declined 2.3 percent to 1.476 million metric tons in the season that ended last week, Massandje Toure, director general of the Coffee and Cocoa Council, said on Oct. 3. Ivory Coast sold most of its 2012-13 harvest at an average price of 1,223 CFA francs a kilogram during auctions from January to September, Agriculture Minister Mamadou Sangafowa Coulibaly said this week.
Farmers who turned away from cocoa for crops such as rubber may be encouraged by the higher price to return, Zoungrana said. The industry reforms convinced him to plant cocoa instead of rubber on a 20-hectare plot purchased last year, he said.
“Some farmers were hoping to get a higher price, but after considering it, this is good news for all of us,” Salam Pelega, who owns a 124-hectare farm in the western town of Soubre, said by phone. He said he sold his beans last year from 500 francs to 700 francs a kilogram.
Farmers will need to be vigilant and “be their own police” against buyers and other industry middle-men who may try to pay less than the fixed rate, said Bile-Bile, head of a cooperative in the eastern town of Abengourou.
The government pledged to make sure the new pricing system will be respected on the ground, Massandje Toure, head of the Cocoa and Coffee Council, said on Oct. 3.
“Those who won’t respect the price will have their licenses withdrawn and will put themselves at risk of penal proceedings,” she said. As many as 368 agents from the council and 500 people from the National Rural Development Agency will make sure regulations on both price and quality are respected, Toure said.
Farmers and industry officials are in a “wait-and-see position” on whether the price will be adhered to, said Zoungrana. “If the middle-men consider the price is too high and they won’t make any profit out of it, they may decide to wait before buying,” he said. “But many farmers don’t have a place to stock their beans in decent conditions. They won’t be able to wait for a long time and may have to lower the price.”
Improvements to cocoa-region roads need to be made so “it is not an excuse for the buyers to ask less for the beans” as they factor in higher transportation costs, Jacques Kouacou, head of a cooperative in the western town of Daloa, said by phone on Oct. 3. As much as 3,000 kilometers of roads will be rehabilitated from October to December in the main cocoa-growing centers, Toure said.
The government has lowered the tax it takes on cocoa exports to 18 percent of the total cost cost, insurance and freight price from 22 percent to help resolve a dispute on transportation and handling fees, Coulibaly said.
March-delivery cocoa gained 0.1 percent to 1,540 pounds ($2,491) a ton by 10:17 a.m. on the NYSE Liffe market in London.
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