Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Workers gather bags of cocoa at the port of Abidjan, Ivory Coast. Last week Ghana, the second-largest producer behind Ivory Coast, set its cocoa price at around 25 per cent, or 180 CFA francs (35 cents) higher per kilogram, than the Ivory Coast price of 725 CFA. Ghana’s Finance Minister acknowledged that the price difference was likely to lead to smuggling, a topic that both governments had previously been reluctant to broach in public. (LUC GNAGO/REUTERS)
Workers gather bags of cocoa at the port of Abidjan, Ivory Coast. Last week Ghana, the second-largest producer behind Ivory Coast, set its cocoa price at around 25 per cent, or 180 CFA francs (35 cents) higher per kilogram, than the Ivory Coast price of 725 CFA. Ghana’s Finance Minister acknowledged that the price difference was likely to lead to smuggling, a topic that both governments had previously been reluctant to broach in public. (LUC GNAGO/REUTERS)

AGRI-BUSINESS

Cocoa smugglers rub hands over Ghana price Add to ...

A yawning gap between Ivory Coast’s and its neighbour Ghana’s cocoa price could set the scene for record volumes of smuggling, which distorts production data and bleeds vital revenue from the world’s top grower.

Last week Ghana, the second-largest producer behind Ivory Coast, set its cocoa price at around 25 per cent, or 180 CFA francs (35 cents) higher per kilogram, than the Ivory Coast price of 725 CFA.

More Related to this Story

Ghana’s Finance Minister acknowledged that the price difference was likely to lead to smuggling, a topic that both governments had previously been reluctant to broach in public.

West Africa accounts for nearly three-quarters of world cocoa output.

With the main prices now set, a sustained rally in cocoa futures prices – which are hovering near a three-month low – would also boost flows of beans into other countries beyond Ghana, including Togo, Liberia and Sierra Leone.

“This year, I think almost all cocoa grown in eastern Ivory Coast will go to Ghana because of the costs of transporting it to Ivorian ports,” said Philipp Aka, a middleman (pisteur) who buys cocoa from farm to farm, based around 8 kilometres inside Ivory Coast’s border to Ghana.

“It’s going to be difficult for us to deliver cocoa to Abidjan and Ghana buyers are already beginning to come here.”

The 2012-13 October-September cocoa season marks the introduction of Ivory Coast’s fixed farmer price, which ends more than a decade of liberalization of the sector, aimed at increasing incomes for farmers and encouraging reinvestment in the country’s aging plantations.

“I think (cocoa smuggled) out of Ivory Coast will be a record,” said a European cocoa trader.

“We’ve seen up to 200,000 tonnes go out in the past and I think that’s definitely possible.”

Traders estimated that around 50,000 to 70,000 tonnes of cocoa was smuggled out of Ivory Coast in the 2011-12 season.

“The prices just announced definitely increases the risk of more cocoa moving to Ghana than was expected,” said a second European cocoa trader.

The smuggling is a problem because it deprives Ivory Coast of much-needed tax revenues after civil unrest last year that ended with the ousting of president Laurent Gbagbo, and also skews production data on which the cocoa industry’s investment decisions are based.

“Alarming levels of smuggling would have a devastating blow to the economy of Ivory Coast because of unpaid taxes, so my belief is, yes, there might be some difficulties at the onset because we’re going into a new system, but the government will put as much effort as possible to get the reform started and going for this crop,” said a European trader.

While it has always gone on, smuggling spiked during the four-month conflict last year in Ivory Coast as hold-ups at its two main ports prompted many farmers to funnel beans through Ghana to the east and north to Burkina Faso en route to port in Togo.

Industry estimates put the real size of the 2010-11 harvest in Ivory Coast at around 1.7 million tonnes against the some 1.5 million tonnes that were officially declared – suggesting around 200,000 tonnes were smuggled out unrecorded.

There are fears that if the middlemen who buy from farmers and sell on to exporters are not happy with their margins, they could also look to smuggle to other countries for better prices.

“To avoid losing margin, I think that may incentivize traitants (middlemen) to smuggle more into other countries, they might look for other markets where they might get a better price,” another European trader said.

Last month Ivory Coast’s Coffee and Cocoa Council (CCC) unveiled reimbursable costs for exporters, setting allowances for the costs of collection from farms and transportation to ports at 80 CFA francs per kg, still below exporters request for 94.2 CFA.

“It is not possible to deliver the cocoa to Abidjan port at a cost of 80 CFA, as in previous seasons we spent at least 130 CFA between here and Abidjan,” said Claude Tiemele, a pisteur based around 12 km from the border with Ghana.

“I will sell my cocoa in Ghana, young people of the village will transport it with motorcycles, and it is much cheaper than if I transport it to Abidjan.”

Farm-to-port handling costs include transport and buyer’s commission. Added to that, roads are choked by racketeering police and soldiers extorting money from truckers.

“The real problem is not what the price is in Ghana, it’s what the world price is, especially if the traitants are not happy with what they are paid … for them there might be a strong incentive to send cocoa outside of Ivory Coast – Togo particularly is exposed to international market,” another cocoa trader said.

In 2010-11, bean exports from Togo were around 120,000 tonnes although traders said the country’s production is around 10,000 tonnes.

Follow us on Twitter: @GlobeBusiness

 
Security Price Change
CJ-FT Cocoa 3,194.00 0.0000
0.00 %
Add to watchlist
Live Discussion of CJ on StockTwits
More Discussion on CJ-FT

Topics:

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories