World’s Top Cocoa Growers May Seek More Control To Boost Cocoa Prices

(Bloomberg) -- The world’s two biggest cocoa growers are planning to suspend exporters’ sustainability programs in a bid to exert more control over prices.

Regulators in Ivory Coast and Ghana, which produce more than 60% of the world’s cocoa, decided in a meeting in Accra last week to suspend programs allowing buyers to verify if cocoa is grown sustainably, according to two people familiar with the matter. They asked not to be named because they are not authorized to speak publicly.

This would make it more difficult for traders to access markets that seek guarantees that the key chocolate ingredient hasn’t been grown in protected forests or using child labor.

Spokespeople for the two regulators did not answer calls seeking comment.

The West African nations used a similar move last year as leverage to get more companies to pay the Living-Income Differential, a higher price paid to ensure cocoa farmers earn more money for their labor. They backed off days later after more buyers committed to paying an extra $400 a ton for their beans. This time, they want buyers to pay the full country premium, a separate differential charged for quality.

London cocoa futures rose as much as 3.1% at 3:30 p.m. Tuesday to a three-week high. Still, prices are down about 12% from a peak in September after expectations that big West African crops will lead to a global surplus.

Shorter Contracts

The announcement to suspend the programs was delayed following the Nov. 12 death of former Ghanaian President Jerry Rawlings, the people said. The No. 2 producer’s official period of mourning ends Thursday.

The authorities’ decision came after foreign exporters had temporarily halted the purchase of cocoa contracts in Ivory Coast last month to force the regulator, Le Conseil du Cafe-Cacao, to reduce the country premium amid slowing demand for chocolate. In Ghana, there’s also been resistance to paying this premium, one of the people said, with buyers switching to shorter-term contracts to avoid getting locked in at high prices.

Shorter-term contracts will allow buyers to “negotiate down the prices in the future,” Nathan Hayes, an analyst at the London-based Economist Intelligence Unit, said in an emailed response to questions Tuesday.

©2020 Bloomberg L.P.