Updated: Farmers count losses as cocoa price drops 50%

Nigeria’s cocoa farmers who havery been enjoying a 13 month roller coaster good fortune, on the back of the ailing naira and fair produce prices, are now in a quandary as the market endures a glut and the local currency strengthens against its US benchmark.

Nigeria’s flagship export product, cocoa, has fallen 50 percent as farmers began harvesting their mid-crop last month.

BusinessDay findings show that the local price of cocoa per ton, as at the time of writing was N500,000, more than twice lower when compared to N1.1 million in January of 2017.

“Exporters are not even ready to buy cocoa from farmers because of the erratic nature of the international prices of cocoa beans. This is going to affect farmers’ income and the country’s non oil revenue,” Robo Adhuze, chief operating officer, Centre for Cocoa Development Initiative told BusinessDay in a telephone response to questions.

“Farmers have commenced the mid-crop harvest and the price of a metric ton of cocoa now sells for N500,000 as against N1 million  in December last year,” Adhuze said.

Nigeria has two cocoa harvests; the smaller midcrop from April to June, and the main crop from October to December.

The mid-crop usually accounts for about 30 percent of the country’s cocoa output, while the main-crop accounts for the remaining 70 percent.

On a year-on-year basis, the global average price of cocoa declined by 57 percent from $3,078 per metric ton in April 2016 to $1,961 per ton in April 2017, according to data from the International Cocoa Orgainsation (ICO).

“We are just harvesting but buyers are not coming to the farm to buy from us. Some of the farmers are taking their cocoa to warehouses in Lagos to see if they can get buyers for the crop,” said Hakeem Adebisi, a cocoa farmer in Ajebandele in Ondo state.

“Prices have dropped by almost half, yet exporters are not patronising us. Most of our cocoa harvest is still lying fallow on the farms. We have been drying them and hoping to find buyers because we cannot keep the cocoa beans for too long,” said Adebisi.

He noted that cocoa farmers are in a quandary, as most of them are now selling at a loss, adding that this would have a huge negative impact on their livelihood.

Nigeria, the world’s fourth largest cocoa producer and supplier, saw its export of the product increase in 2017 as exporters and farmers made more money from cocoa sales, experts say.

Zacheaus Egbewusi, cocoa inspection officer, Agri-commodity Inspection Limited, said “It is the international price of cocoa that determines Nigeria’s cocoa market. We produce cocoa but consume very little of what we produce.

“Most exporters are not exporting cocoa because of the decline in the international prices, along with higher value of naira against the US dollar. Exporters now prefer buying cashew than cocoa because it is profitable for them,” Egbewusi said.

Key players in the industry who spoke with BusinessDay, said the situation would have not have been so bad if cocoa processors operating in the country were operating at full capacity and had access to adequate finance for processing.

Sayina Rima, president, Cocoa Association of Nigeria (CAN), said “A lot of cocoa beans are lying fallow in the farms owing to low prices at the international market. This would not have been a problem if processors were buying and processing. All the cocoa processing factories are not operating at full capacity and lack adequate funds to run.”

According to stakeholders, processing companies in Nigeria cumulatively are operating below 15 percent capacity. “Most processors could not invest in backward integration because it is very expensive to invest in  processing as well as the farming aspects. We do not have access to cheap long term funds,” said Akin Laoye, chief executive officer, FTN.

“We are yet to access the export stimulating fund for manufacturers since last year. We made huge losses when the prices were much higher last year and now we cannot take advantage of the lower prices because of inadequate finance,” Layo added.

Josephine Okojie