Dear chocolate getting expensive: Ivory Coast to raise cocoa farmgate price by 50pc
Business
Consumer expected to witness 'shrinkflation'
- Cocoa prices have more than tripled over the last year as disease and adverse weather pushed the global market to a third successive deficit
ABIDJAN (Web Desk) – Ivory Coast's President Alassane Ouattara will increase the official cocoa farmgate price to 1,500 CFA francs ($2.47) per kg from Tuesday from the current 1,000 CFA, sources at five different export companies told Reuters.
The farmgate price refers to the rate at which agricultural products are sold by farmers at the point of production. It is the price received by farmers for their crops or livestock before any processing or transportation costs are incurred.
The sources, who requested anonymity because of the sensitivity of the issue, said they were citing a decision at a government meeting on Saturday.
Earlier in the day, Ouattara had validated a proposal for a price of between 1,100 and 1,200 CFA francs per kg before reversing his decision and asking that the price be even higher, the sources said.
The government and the cocoa regulator the Coffee and Cocoa Council (CCC) could not be reached for comment on Sunday, says Reuters.
Cocoa prices have more than tripled over the last year as disease and adverse weather pushed the global market to a third successive deficit, but the official farm gate price that growers can charge for their beans in Ivory Coast, a top producer, has yet to reflect this.
"There were several proposals on the table and as a last resort the president wanted the highest possible price for the producers so he decided 1,500 CFA per kg instead of 1,200 CFA, which had been validated previously," the director of a European export company told Reuters.
"Ultimately in the current context, this is the best possible price that the CCC can pay because the sales system in Ivory Coast is such that it is difficult to change prices during the season," the person added.
The director of another international export company said: "The president judged the world market situation to be exceptional and wanted an exceptional reaction too."
Last week, the CNBC had reported that consumers could start to see the effect of surging cocoa prices as the world faces the worst supply deficit in decades, with farmers in West Africa struggling against bad weather, disease and failing trees.
The world is facing the largest cocoa supply deficit in more than 60 years and consumers could start to see the effect at the end of this year or early 2025, Paul Joules – a commodities analyst at Rabobank – told the CNBC said.
The International Cocoa Organization has forecast a supply deficit of 374,000 tons for the 2023-24 season, a 405pc increase from a deficit of 74,000 tons in the previous season.
“The worst is still yet to come,” Joules said. Cocoa prices will likely remain elevated for some time because there are no easy fixes to the systemic issues facing the market, he said.
Consumers could face higher chocolate prices or “shrinkflation” in the form of smaller chocolate bars, Joules said. Companies might also adjust ingredients to use less cocoa in some products, he said. The worst sticker shock would come from dark chocolate, which has a very high cocoa content, the analyst said.
