Yves Kone, the Managing Director of Cote d’Ivoire’s powerful regulator, Le Conseil du Cafe Cacao (CCC), has told reporters that the Living Income Differential is here to stay.
“We now consider the LID to be part of the commercial life of cocoa” – Yves Kone
Farmers are currently waiting to hear from the regulator, who is due to set the farmgate season price. Many expect a good price this year, but knowing that the LID is protected will offer some additional reason for optimism.
As we previously reported, the worlds biggest producer was in a standoff with some chocolate companies, who found novel ways to avoid paying the LID premium.
At the start of the 2020/21 season, the premium received via the differential enabled the regulator to push the farmgate price as high as 1,000 CFA ($1.79 per Kilogram). However, they later brought it back down for the second and smaller of the harvests in April.
Unfortunately, the timing for the LID was not ideal, as it came on the heels of the pandemic, and slipping demand. In addition, chocolate companies that had signed up earlier now wanted to find ways to avoid paying it legally.
Hershey reportedly purchased up to 30,000 tonnes of cocoa from futures exchange ICE. Others paid in full but reduced the normal country premium, which is paid to reflect the quality of the cocoa. This reduction in the country premium was seen as a proxy discount on the LID by the producing countries.
Now, we expect Yves Kone to be assessing the market and the buyers before committing to a price for farmers.
The producing countries want buyers to be acclimatised to the premium and avoid a repeat of the dispute.
Some people have thought that because we have made efforts to reduce the country differential, that we are allowing the LID to die”. “No, the LID is here to stay. – Yves Kone
Côte d’Ivoire and Ghana anticipate a slightly smaller harvest for the season that starts on Oct 1; Ghana expects to produce 950,000 tons, about 50,000 tons less than the previous forecast. Kone says Côte d’Ivoire may have 200,000-250,000 fewer tons in this season.