Cocoa production in Ivory Coast, the largest grower, will be steady in the season started this month as market-structure changes take time to have an impact, according to the government.
Farmers in the West African nation will reap 1.4 million metric tons of cocoa in the 12 months started Oct. 1, said Bruno Kone, a government spokesman. That’s “roughly the same” as in 2012-13, he said. Ivory Coast implemented changes to the cocoa sector last year that included selling 70 percent to 80 percent of the crop before harvesting starts and guaranteeing farmers 60 percent of the international price.
“We started working on cocoa production only two years ago, so it takes time,” Kone said in an interview in London today. “You have to renew some plantations, you have to create new plantations, you have to introduce chemicals, etc. and etc., and this will give results in the next few years. We think the production will still grow.”
Cocoa futures gained 18 percent in London this year, entering a bull market last month, as global demand outpaced supplies. Production will be smaller than consumption by 173,000 tons in 2013-14, estimates Kona Haque, a London-based analyst at Macquarie Group Ltd., who correctly forecast a third-quarter price rally. Another shortage is expected next year.
Global chocolate sales will climb 6.2 percent to a record
$117 billion next year, says Euromonitor International Ltd.
There are signs demand is improving. Cocoa processing in Europe, which accounts for 40 percent of usage, gained 4.7 percent in the third quarter from a year earlier, data from the European Cocoa Association showed. Grindings gained 8.2 percent in the U.S. and 12 percent in Asia in the same period, say the National Confectioners Association and the Cocoa Association of Asia.
“Production of cocoa is still increasing, but very slowly, and the consumption is increasing,” Kone said. “Consumption of chocolate in the world is still increasing, so we hope prices will increase. A few years ago, prices were 20 percent to 30 percent higher than the level they are today, so we think there’s margin for increase.”
While Ivory Coast removed subsidies for local grinders and began taxing them on the volume of beans they process rather than on the products they ship, the country still aims to boost the local industry, Kone said. The nation aims to grind 50 percent of its crop by 2020 from 30 percent now, Jean-Claude Brou, the nation’s minister of industry and mining, said at a presentation at a conference in London today.
“We still encourage transformation, but we think the local producers have to buy the product at the same price,” Kone said. “They can still make money with this level of tax.”
Ivory Coast scrapped tax-breaks for grinders in September 2012. It also introduced that year rules that meant processors have to pay tax on the beans they buy instead of the products they ship using a ratio of 125 tons of beans for every 100 tons of product exported. The change meant domestic processors and exporters of raw beans now pay a similar amount of tax.
While there are no discussions to change the system, “the doors aren’t closed either,” Kone said.
Ivory Coast wants to boost coffee production to 350,000 tons in three to five years, Kone said. That compares with 100,000 to 150,000 tons now, he said.
Taken from: Bloomberg News