With a response of chuckles and applause, ex-President Mahama of Ghana said:
We are presenting a united front on the commodity markets. And we’re going to call it Chocpec
President Alassane Dramane Ouattara of Côte d’Ivoire and Ghana’s former President, John Dramani Mahama, discussed this union at the 2016 Africa CEO Forum. These two countries produce 70% of the global cacao supply which creates quite a bit of leverage when communicating with large multinational chocolate companies.
“That is exactly what we’re doing,” said President Ouattara
The price of cacao currently fluctuates based on the New York Commodity Exchange and these two nations are working to leverage their resource wealth to become independent of this system which they hope will allow them to have more control over prices.
We wrote last week how the Ghanain president recently cut off the cacao trade with Switzerland in an effort to increase the processing of their natural resources within Ghana. Events like this coupled with the creation of “CHOCPEC” will likely increase the influence of these countries in the global economy.
The supply of cacao in 2020 broke records, while the demand was lacklustre. As a result, countries like Cote d”Ivoire lowered the price paid to their farmers by an eye-watering 9% to $1.35/kilo. Strangely, they also expected farmers to increase production, presumably to make up for the lower profit margins – a perverse set of conditions to impose when you consider that an increase in supply will further depress an over-supplied market.
As countries around the world dealt with coronavirus infections, chocolate sales were not a pressing matter. Ghanaian and Ivorian cacao has been less attractive to grinders during the pandemic since the two countries have a LID (Living Income Differential) of $400/tonne. Grinders are looking to cut costs as sales decrease.
Cacao future contract prices in London and New York have experienced a 13% and 14% dip due to the surplus of cacao. Some in the market are placing their hopes on the rising demand for cacao in Asia, especially India to make up for the dip in demand from the US and Europe.