The Coffee and Cocoa Council (CCC), the Cocoa regulator in Côte d’Ivoire, has set a deadline of 20 November 2022 for Cocoa buyers to include the Living Income Differential (LID) in their new prices. The LID is $400 per tonne of Cocoa and applies to all contracts sold by both Côte d’Ivoire and Ghana.
Cocoa buyers are reportedly reluctant to pay the increased prices for Cocoa, which have recently risen in the two African countries, as they refuse to further accept negative origin differentials. Cocoa buyers were previously said to be offsetting the cost of LID by paying negative origin differentials, but now that both Côte d’Ivoire and Ghana have set positive origin differentials, buyers are questioning the new cost of Cocoa.
The oversupply of Cocoa creates downward pressure on world prices, and, therefore, the argument goes, impacts the price paid to farmers. This must be balanced against the danger of an unprofitable industry, which may not be sustainable for farmers. Yet farmers have suffered for years, and the industry is able to continue despite the commitments made by all parties to improve their situation.
The CCC has put the industry on notice after setting a deadline of 20 November for positive origin differentials to be a required factor in pricing.
According to Reuters sources, many of the major Cocoa companies have already been informed of the changes and the timeframe for their implementation. These include Cargill, Ecom Trading, Sucden, CEMOI, Barry Callebaut, Olam and Touton. Council representatives will take the message to Mondelez and other multinationals next week.
The positive origin differentials were set in early August this year, with the CCC setting the differential for Côte d’Ivoire at $0 (from -$151) and COCOBOD setting the differential for Ghana at $24 (from -$60) per tonne.
We had a meeting with Cargill, Cemoi, Touton, SucDen, Ecom, Barry Callebaut and Olam…and clearly told them they have until November 20th to account for the LID and the origin differential of zero.An unnamed CCC source
Otherwise all their sustainability programmes will be suspended.
According to another CCC source, buyers who do not comply with the new prices will be denied access to Cocoa farms, making it impossible for them to count pods and predict crop yields.