A price war over cocoa beans has been launched across the southwestern cocoa belt in the Ivory Coast, prompted by fears of a global shortage in supplies. The issue is causing quite a dilemma however, as the major players in the commodity raise prices to a tightrope that could fall at anytime if they decide to form a monopoly.
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US companies Cargill and Archer Daniels Midland have been cutting out the middleman to work more effectively with farmers and farming co-operatives. While this bumps up the prices at ground level, smaller exporters and the middlemen themselves are suspicious that the giants might agree between themselves to force prices down.
“We have noticed that cooperatives produce better-quality cocoa [than middlemen],” said a source from Cargill, adding that as yet not all the demand could be fulfilled by cooperatives. To resolve this situation, the company has invested in seminars designed to teach farmers how to improve harvesting, fermentation and drying methods.
At Archer Daniels, only about 8% of this season’s projected crop is expected to come form co-operatives.
The government of the Ivory Coast, which produces 40% of the world’s cocoa, is hesitant to welcome the situation. The market was liberalized in 1999 and heavy competition between giants like Cargill and Archer Daniels is undoubtedly a positive influence in rising prices for farmers and support for co-operatives. Such concentrated economic power in two companies is not a desirable situation, however.
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By GlobalDataThe companies may yet stumble over a local law, which prevents exporters from buying cocoa and coffee directly, but at present they argue that they both operate within the law. By exporting cocoa in a semi-finished form from processing factories in Abidjan, both companies can gain substantial tax advantages.
