Major cocoa producers, Ivory Coast and Ghana, are grappling with a double blow of low profits and potential smuggling due to pre-selling contracts made at significantly lower prices.
These contracts, representing nearly 20% of their harvest and pre-sold at around $2,500 per ton, cannot be fulfilled this season due to poor harvests. The aim now is to deliver them next season, missing out on the current high global prices nearing $8,000 per ton.
This situation stems from the pre-selling system employed by these West African nations, where most cocoa is sold a year in advance. While intended to protect farmers from volatile price swings, it backfired this year due to the unexpected surge in cocoa prices.
The rolled-over contracts will depress the average sales price for next season, impacting farmer income. This disparity between world market prices and their fixed price could incentivize smuggling cocoa to neighboring countries like Cameroon, where farmers receive nearly four times the price.
Compounding the problem are poor harvests caused by adverse weather and disease. This limited supply, coupled with the low prices received, disincentivizes farmers from investing in proper crop maintenance, potentially affecting future yields.
Industry experts like Steve Wateridge of Tropical Research Services urge a quicker response to market price changes to incentivize proper crop care and ensure a sustainable cocoa production future.
