Ghana Cocoa Premium Seen Declining on Better Ivorian Quality

The premium that cocoa from Ghana commands over beans from Ivory Coast, the world’s largest producer, has declined from the five-year average as the difference in quality between the two countries shrank, according to three traders with direct knowledge of the sales.

Ghanaian cocoa in the European market this week cost 35 pounds to 40 pounds ($56 to $64) more than the beans from Ivory Coast, according to the traders who asked not to be identified because they’re not authorized to speak to the media. That compares with an average premium of about 80 pounds a ton in the five years to 2011, data from KnowledgeCharts, a unit of Commodities Risk Analysis in Bethlehem, Pennsylvania, showed.

The quality of Ivorian cocoa improved in the season started Oct. 1 after the government implemented a reform of the sector which includes a price guarantee to farmers that is 60 percent of the international value. Moisture levels in Ivorian cocoa have dropped to 8 percent to 9 percent from 10 percent to 12 percent the previous season, Tristan Borne, cocoa and chocolate managing director at French grinder Cemoi, said in an interview in Abidjan, the nation’s commercial capital, Nov. 20.

“Ivorian quality is improving and people don’t feel that they are as tied to buying as much Ghana as before,” Steven Haws, founder of Commodities Risk Analysis, said yesterday. “The differential between Ghanaian and Ivorian cocoa could still narrow if Ivory Coast maintains the pace of quality improvement.”

Ghana Premiums

Ghanaian cocoa in the European market this week cost 75 pounds to 80 pounds a ton more than futures on NYSE Liffe in London, the traders said. That compares with 75 pounds to 85 pounds two weeks ago. Ivorian beans were at a premium of 40 pounds to 45 pounds a ton to the exchange price, according to the traders. They were 35 pounds to 40 pounds on Jan. 4.

The price difference between beans from the two West African nations started to narrow after 2009, with smuggling of lower quality cocoa from Ivory Coast into Ghana pushing down the Ghanaian premium, Haws said. Quality improvements in Ivory Coast beans will probably prevent the price difference from widening again even without smuggling this season, Haws said.

“The improvement in Ivory quality is likely to have a weakening effect on Ghana premiums rather than a strengthening effect on Ivorian differentials,” Jonathan Parkman, co-head of Agriculture at London-based futures and options brokerage Marex Spectron Group, said by e-mail on Jan. 16.

While Ivorian cocoa premiums to NYSE Liffe were last year 2.3 percent lower than the average of the five years to 2011, the premium for beans from Ghana declined 36 percent compared with the five-year average, KnowledgeCharts data showed.

Cocoa for March delivery fell 0.5 percent to 1,481 pounds a ton by 1:21 p.m. on NYSE Liffe in London.

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