The world’s largest cocoa producers, Côte d’Ivoire and Ghana are seeking to dampen the economic blow of the pandemic on poverty levels by considering an increment in the payment to local growers.
The two West African countries, which account for 65 percent of global cocoa production, have been forced to consider the farm-gate price for cocoa by as much as 21 percent considering the fact that cocoa futures for December delivery have dropped up to 14 percent this year due to the impact of the coronavirus, which has led to a drop in demand.
However, reports suggest that the plan is likely to be unsustainable beyond next season.
NKC Africa Economics in a research report noted that low prices will make it difficult for the two countries to keep up farmer incentives without losing competitiveness and sacrificing market share.
Nathan Hayes, an analyst at the Economist Intelligence Unit (EIU), stated that supporting incomes in the cocoa sector will play a vital role in this, given the large share of employment as well as indirect economic benefits the cocoa sector plays in the economies of both countries.
The two countries are also trying to boost their grinding capacity to process half of their beans locally in a bid to absorb some of the demand. In addition, efforts have also been made to limit cocoa output to spur prices further.
However, plans to cap production are unlikely to materialize, owing to difficulties in implementation.
Hayes suggests that while the implementation of higher prices is expected to improve living conditions of cocoa growers, they may also contribute to a market surplus as demand growth struggles to keep pace with potential increased production.
“We expect more rapid downward pressure on global cocoa prices in 2021,” Hayes said.