West Africa’s cocoa giants are preparing for another big harvest, with a focus on whether the demand recovery after the COVID-19 pandemic can absorb the oversupply from last year.
The main-crop harvest started on Friday in Ivory Coast and will begin next week in Ghana. Notably, these are the world’s top two regions in terms of cocoa exports and account for around two-thirds of total global production.
As per estimates from the countries’ regulators, the combined output is likely to decrease in the new season, but it would continue to remain historically large. The global market is likely to witness a shortage or would be balanced by next year, with Asia remaining a major driver.
On Friday, Ivory Coast decreased the farmgate price of the main crop by 18% to USD 1.46 per kilogram as compared to the earlier year.
Ghana already has a large idle inventory of beans, due to slow demand from overseas, which is why it has been priced at a minimum rate of USD 1.71 per kilogram, as announced by Owusu Afriyie Akoto, Ghanaian Minister of Food and Agriculture.
The difference between the farmgate prices in these two countries might promote smuggling. Intermediaries might buy beans in Ivory Coast and then sell them at a greater price in Ghana.
Another big point of discussion is how the sector will cope with the USD 400 per ton premium, which was brought in the past year to support farmers.
The charge came into effect just when lockdowns affected consumption, pushing intermediaries to pay less than the minimum prices set by the government, and inciting allegations that some major chocolate companies tried to sidestep the premium.
It is worth noting that Ivorian and Ghanaian farmers are satisfied with the weather as they begin two major annual harvests.
The Ivorian regulator mentioned that output for 2021-2022 might decrease by 200,000-250,000 tons from a potential record of 2.2 million tons in the previous year, while Ghana is likely to produce 950,000 tons, significantly lesser than the estimated all-time high of 1.06 million tons.