Despite being cornered in the list of minor cocoa producing states, stakeholders in Nigeria’s Cocoa production are optimistic that their produce would benefit from the floor pricing of $2,600 per ton being pushed by the Ivory Coast and Ghana, the world’s two biggest cocoa producers.
Should the duo follow through with the plan, it will become handy as an international index for the commodities pricing, making it possible for less producing countries like Nigeria to even negotiate for higher prices.
“The moment it is agreed internationally, we will also work with it as the prevailing price. It is a very common practice in the market economics of demand and supply. When there is low supply, Nigerians can easily determine price because there will be more demand for our Cocoa. That’s where the independence comes in,” Sayina Riman, president Cocoa Association of Nigeria (CAN) told BusinessDay.
His confidence also derives from the fact that Nigeria has a highly sought-after variant of Cocoa, which will continue to boost demand.
According to monitored reports, the two biggest producers have suspended sales for the harvest that will begin in October 2020, pending an agreement with buyers on a minimum price.
Unlike Nigeria where freedom of market forces of demand and supply is allowed, Ivory Coast and Ghana have instituted boards which regulate pricing. If the market price ends up below the proposed $2,600 level, the two regulators plan to make up for the difference through a “living-income differential, Joe Forson, managing director of Ghana Cocoa Board’s marketing unit, told buyers Accra.
A technical committee will be established to meet in Abidjan on July 3 to discuss the implementation of the plan.
The regulators of both countries are meeting buyers about the proposal, which they said is necessary to address income disparity in the cocoa value chain. The two countries last year outlined plans to coordinate cocoa production and marketing as part of efforts to exert more control in the market after sharp price swings in recent years.
Accounting for about three-fifths of global cocoa output, Ivory Coast and Ghana typically sell about 80 percent of the bigger of the two annual harvests before it starts. In its bid to widen its revenue, Ivory Coast is particularly tinkering plans to expanded its capacity for blending.
Nigeria produced 255,000 metric tonnes within 2017/2018, according to the International Cocoa Organisation (ICCO). Ghana and Ivory Coast who account for 65 of global cocoa supplies believe that the current pricing structure that makes cocoa producers price takers does not reflect their contribution to the sustenance of the cocoa industry.
Riman thinks Cote d’Ivoire and Ghana are using their power of production to undermine others and only points to the need for Nigeria should up its game and follow its Cocoa Action Plan to develop and also be reckoned with when it comes to trade negotiation.
One of the drives of the Nigerian Cocoa Action Plan is that origin countries should consume not less than 30 percent of its production in the short term – a move projected to stabilise price.
The Nigerian approach, he says, believes that the entire continent that produces about 75 percent of the world’s Cocoa needs to highlight about consumption and in that, Nigeria is a huge market compared to a combination of all other producing countries.
“We will also be benefitting from it. But why I have refused to talk about it is that we should come together and actualise the plan. We also look at when we have a glut and we consume less. We believe in the objective but not being carried along means they have denied good collaboration with other producing countries,” explained Riman.
A free market does not mean you cannot regulate price. Nigeria has one of the strongest flavours and we are working with consultants within the research world to be able to build and differentiate and build our cocoa into different brands.”
