Côte d’Ivoire sold 950,000 tonnes of cocoa by the end of May at a discount instead of collecting its usual country premium, according to regulators.
The Living Income Differential (LID) of $400 a tonne had been added to the price from the worlds largest supplier of cocoa, but the country normally is also able to attach a country premium of $99-$212 per tonne to reflect its quality
As a result of the premium allocated for farmers, known as the Living Income Differential (LID), buyers have been applying pressure for the country premium to be reversed, to become a discount. This would enable the farmers to receive extra cash but at the expense of the overall price paid, making it more globally competitive according to some buyers.
The sales contracts for May appear to show discounts of $212-$283 per tonne, which would cut the governments’ revenue, but still leave the farmers technically with their premium.
Buyers have complained that, given the current soft market, they’re finding it hard to pay both the LID and the country premium.
Negotiations have been ongoing as the country continued to add cocoa beans to the stockpile as supply continued to outstrip demand caused by global lockdowns from the pandemic.
As of the mid-May period, sales figures were confirmed to be 560,000 tons with a further 390,000 tons that are subject to the outcome of the price negotiations between the chocolate companies and the Cocoa and Coffee Council (CCC) in Côte d’Ivoire. Therefore, expected sales for next season are 950.000 tonnes, which is considered reasonable under the current conditions.
“The fundamentals of the global market are not favourable for us to pay both the LID and a positive differential. Either lower the LID and keep the differential or the other way around,” said the manager who asked not to be named.