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Voice of Cocoa

We Will No Longer Sell Cocoa With A Negative Premium

...Ghana and Cote d'Ivoire declare, as they raise origin differentials to safeguard farmer income

Global cocoa production giants Ghana and Cote d’Ivoire say effective this month, August 2022, their cocoa would sell at a positive origin differential, a market premium earned for the quality of produce.

The resolve announced by the Cote d’Ivoire-Ghana Cocoa Initiative (CIGCI) comes on the back of persistent heavy discounting of the origin premium by cocoa buyers and chocolate companies.

The world’s top-two cocoa producers have in recent times complained about targeted discounting of their origin differential, a key component of cocoa prices, despite maintaining quality.

“Today, origin differentials in Côte d’Ivoire and Ghana have fallen sharply compared to the differentials in other cocoa producing countries; the differentials for the two countries have fallen by over 150% in the last 2 years,” the CIGCI said.

According to the CIGCI, effective this month Ghana cocoa will be selling with a positive origin differential of £20 per tonne from negative £50 per tonne in July.

Similarly, Cote d’Ivoire will raise the quality premium to £0 per tonne, up from negative £150 per tonne last month.

Ghana’s regulator Cocobod revealed last month it is accumulating $400million a year in debt to maintain farmgate prices at acceptable levels as premiums are completely eroded.

“Our ambition is to no longer sell cocoa with a negative premium. It is to ensure that our producers receive a decent and remunerative income for their cocoa and to achieve this, the origin differential must once again be positive and the LID also applied,” Alex Assanvo, Executive Secretary of CIGCI, told Reuters.

Assanvo insisted, “We will therefore no longer accept cocoa sold below this level as we move into positive territory.”

The negative trend in the origin differentials for Cote d’Ivoire and Ghana has also adversely impacted the intended positive effect of the Living Income Differential, a $400 per tonne premium, agreed with chocolate companies to address farmer poverty.

Reuters reported that Ghana hopes to sell the rest of its cocoa export contracts for the 2022/23 season with a positive differential, while Cote d’Ivoire has already sold all of its contracts for the upcoming 2022/23 main crop but hopes to apply a positive differential for the 2022/23 mid-crop and the 2023/24 season.

Meanwhile, the governments of the two leading cocoa producer countries say they would, through the Côte d’Ivoire-Ghana Cocoa Initiative, continue the monthly publication of origin differentials to guarantee transparency regarding compliance by market players.

The West African neighbours account for over 60% of global cocoa supply for the chocolate industry worth about $130 billion per annum.

Only 6% of the value go to producers, as cocoa farmers languish in poverty making less than $1 a day in incomes.

Kojo Hayford
Source Cocoa Post
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