Cocoa ramblings

The dust hasn’t quite settled, but it has certainly been an interesting season for cocoa in Cote d’Ivoire. Even just looking at the last few days we’ve seen the death of former all-powerful cocoa baron Henri Amazou, ex-boss of the FDPCC, and the official opening of the global HQ of the International Cocoa Organisation (ICCO) in Abidjan (interestingly, in a building that was once the FDPCC office).

I remember when I first arrived in Abidjan, the newspapers were regularly filled with the feud between Amazou, and the BCC boss, Tape Do. This old blog post from those days is a good reminder. The smell of corruption had been strong for years, but in 2008 the then president decided enough was enough and had almost everyone arrested and tried. The sector’s governance system then faced a massive overhaul – we now no longer have the BCC, FDPCC, ARCC and FGCCC (set up in the previous cocoa sector reform), all replaced by the CCC.

Speaking of great blogs that are no longer active, this week I discovered the insightful At Origin Blog, which is sadly now on hold, though still has a treasure-trove of past articles focused on Cote d’Ivoire and cash crops. I was particularly intrigued by this post on the cocoa price dated 3 October 2016 (the first week of the cocoa season). The cocoa farmgate price ended up being set at a higher level (XOF 1,100/kg) than almost anyone expected. To quote:

The CCC wanted to double the “rainy day” fund [by having a lower farmgate price]— which guarantees 60% of the international price to farmers even if the market collapses — to XOF 150bn, reflecting a conservative and prudent management on part of the regulator. But, the Ivorian government didn’t take the CCC’s advice, opting for the modest hike. This won’t break the bank. The CCC can well afford it, having forward sold the 2016/17 crop when international cocoa prices were still buoyant.

Hindsight is of course a wonderful thing when looking at investment mistakes. As we now know from the other side of the season, the previous years of massive production and high global prices didn’t last (indeed the peak had been in July 2016, and since then prices have dropped 30%). One would hope that the CCC stabilization fund built up in the good years would provide a cushion. But we witnessed far more unraveling than I’d expected – farmers protesting, cocoa piling up in the port, a cut to national state budgets, and almost immediately urgent appeals to the IMF and World Bank to step in (which they are doing). One hoped for a little more resilience.

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