It is anticipated that there will be a scarcity of cocoa beans on the Ivory Coast. Thus, the government agency regulating the cocoa business will not allow bean grinders to amass inventories over the authorized limits during the significant harvest, which runs from October to March.
Cocoa futures have reached all-time highs due to predictions of a decline in production, notably in Ivory Coast and Ghana, the world’s top two producers, which account for more than 70% of world output combined. These two countries produce more than 70% of the world’s cocoa.
As a result of the terrible weather, it is anticipated that Ivory Coast’s primary crop will decline by around 25 percent compared to the output of the previous season.
Cocoa bean grinders and exporters in Ivory Coast are subject to an annual purchase quota under the terms of their export contracts. However, the regulator, the Coffee and Cocoa Council (CCC) provides grinders with an exception so that businesses may stockpile sufficient beans to satisfy 45 days’ worth of grinding operations.
This offers them an advantage over other dealers and ensures they will always have a consistent supply of beans, allowing them to continue their business without disruptions.
Yves Brahima Kone, the managing director of the CCC, told Reuters on Friday that the exemption will be unfair to exporters given the current circumstances since such exporters will have difficulty gaining access to the requisite volumes to fulfill the terms of their export contracts.
“We will not allow bean processors to purchase beyond the purchase limit this year because everyone may not be able to get the cocoa they need,” according to Kone.
“Unfortunately, we have no choice but to come to this challenging conclusion. He went on to say that there would not be enough cocoa for everyone.
Grinders are concerned that if they cannot stockpile beans, they may not have sufficient supplies to fulfill their export commitments and continue grinding beans.
Reuters spoke with many grinders in Ivory Coast who confirmed that the ruling will impact their output. Even though the price of cocoa grind had been falling in Europe for the previous two seasons owing to operational costs, they had continued to run at total capacity.
European bean grinders have decreased their capacity for grinding beans and have requested that their branches in Ivory Coast dramatically boost their monthly grinding volumes as a means of making up for the shortfall.
According to the statistics provided by the Ivory Coast exporters group GEPEX, the monthly average of cocoa grind production in Ivory Coast has been rapidly increasing due to this trend. It reached about 60,000 metric tons per month in September, up from approximately 45,000 tons in 2019/2020.
Cargill (CARG.UL), CEMOI, OLAM (OLAG.SI), and Barry Callebaut (BARN.S) are only some of the principal bean processors that are members of this group.
“Due to the gas and electricity crisis in Europe, it has become much more profitable to grind cocoa locally in Ivory Coast, which had led us to accelerate the pace here since 2021,” said a director of a grinding factory in San-Pedro, who asked anonymity to talk frankly. “With the crisis in Europe, it has become much more profitable to grind cocoa locally in Ivory Coast.”
The total amount of grinding that can be done in Ivory Coast is 712,000 tons. It is in close competition with the Netherlands for the position of the world’s leading grinder. Almost the previous two years, grinding production in Ivory Coast hit record highs, with the most recent season setting a new high of nearly 700,000 tons.
“Our stocks are replenishing very slowly, and if we cannot purchase beyond the authorized limits, it will be catastrophic for all bean grinders,” said the manager of another processing business. “If we cannot purchase beyond the authorized limits, it will be catastrophic for all bean grinders.