Photographer: Jose Cendon/Bloomberg

Ivory Coast Said to Consider Cocoa Deals as Profits Squeezed

  • Regulator said to discuss agreements relating to 80,000 tons
  • CCC had to re-auction some cocoa contracts late in the season

Ivory Coast is considering renegotiating deals with cocoa exporters after a plunge in futures prices made some contracts unprofitable, according to people familiar with the matter.

Industry regulator Le Conseil du Cafe-Cacao is in talks about approaching some exporters to discuss the sales, said the people, who asked not to be identified because the issue is private. The regulator may seek to reach agreements on export contracts amounting to as much 80,000 metric tons of cocoa, one person said. That’s equal to about 5 percent of last season’s crop.

The negotiations relate to forward sales contracts that had to be re-auctioned later in the year, when futures had started to fall. Beans were re-sold at a lower level than the export price set by the CCC, which includes payment to farmers and transport costs. When this happens, the regulator is obligated to reimburse exporters the difference.

Mariam Coulibaly Dagnogo, head of communications at the CCC, declined to comment when contacted by phone and said she was unaware of the plan.

Ivory Coast usually sells about 80 percent of the main crop, which runs from October through March, before the season starts. This year, the CCC had to re-auction about 200,000 tons of cocoa in September and October after shippers failed to produce paperwork showing they had buyers for the beans, raising the risk they would default.

The stabilization fund is designed to mitigate price risks for exporters, and in January, it had reserves of 120 billion CFA francs ($194 million).

Cocoanect, a Rotterdam-based trading firm, estimates the gap between current market levels and the CCC’s expectation at the end of September, when it set farmgate prices, is about 400 euros a ton ($426).

The CCC usually sells the remaining 20 percent of the main crop after the season starts. Futures that have been falling since July are also a risk for the regulator if a bigger-than-expected harvest forces Ivory Coast to sell more beans or if more contracts need to be re-auctioned.

Ivory Coast still has the option of lowering the price paid to farmers. Under the reform of the cocoa sector, the regulator could reduce payments to 50 percent of the export price in times of sharp declines in the international market. At the moment, growers get 60 percent.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE