Ivory Coast Cocoa Stocks May Hit 200K Tons Amid Price Crisis

Main Issue Summary

Ivory Coast is projected to accumulate 200,000 metric tons of unsold cocoa by the end of March as its main crop season concludes. The surplus is a direct result of a state-regulated farmer price set significantly above current world market levels, which has halted sales from farmers to traders facing steep losses on purchases.

Market Overview

As one of the world's top producers, responsible for about 50% of global supply with Ghana, Ivory Coast's pricing policy has created a significant market disruption. This growing stock of unsold cocoa is weighing on world prices, which have plunged 50% this year alone. While the country managed to sell 200,000 tons of its upcoming, lower-quality mid-crop, the premium main crop remains unsold.

Economic and Policy Response

Industry executives report that local traders have already defaulted on at least 100,000 tons of main crop purchases. The government is now considering a price cut to align with Ghana, which recently slashed its farmer price. Ivory Coast's cocoa regulator, the CCC, has called the market's stock estimates "erroneous" but has not offered an alternative figure.

Summary

The market is closely watching for an announcement on new farmer prices, expected by the end of February. This decision will be critical in unlocking the flow of cocoa to the global market and will likely determine the direction of future prices. Without a price adjustment, the stock surplus is expected to grow.

FAQ

Q: Why is Ivory Coast's cocoa unsold?
A: The government-set minimum price for farmers is currently higher than the global market price, making it unprofitable for traders to purchase the beans.

Q: What is the impact on global markets?
A: The large volume of unsold stock is creating downward pressure on global cocoa prices, which have already fallen significantly this year.

Source: investing.com