(Bloomberg) -- Ivory Coast has raised the price it pays farmers for their cocoa above Ghana, even as growers in both countries will continue to receive far less than the global market.
The world’s top producer of the chocolate-making ingredient increased the farmgate price by 20% to 1,800 CFA francs ($3.06) per kilogram for the harvest that starts on Oct. 1, Minister of Agriculture Kobenan Kouassi Adjoumani said in the capital, Abidjan. The rate, which translates to $3,060 per ton is a notch higher than what Ghana started paying farmers at the beginning of its season this month at $3,039 per ton.
This may help to discourage smuggling of Ivorian beans to the world’s second-biggest producer, even though the risk of the illegal exports to other Ivory Coast neighbors, including Liberia and Guinea won’t be fully addressed because of buyers there who pay rates closer to the world market price.
A combination of unfavorable weather, disease and a lack of inputs curbed output across West Africa last season, sending cocoa futures to an all-time high earlier this year, topping $11,000 a ton. Futures have eased since, trading around $7,700 a ton on Monday in New York.
The poor harvest kept the global market in deficit for a third straight year. While output is expected to recover in the upcoming season, the surplus is likely to remain small at around 90,000 tons, according to the average of 15 analysts and traders surveyed by Bloomberg.
The price setting system by governments in Ivory Coast and Ghana has not allowed growers to fully benefit from the global rally. That’s prevented adequate investment in farms and encouraged smuggling to neighboring countries where the market isn’t as tightly regulated and prices are much higher.
Ivory Coast has lost an estimated 150,000 to 200,000 tons of beans to smuggling during the crop year that ends on Monday, Bloomberg reported Sept. 19.
As part of a “strategic cooperation,” Ivory Coast from 2024-25 will begin to harmonize output control, pricing and marketing system with Ghana, Adjoumani said. The farmgate price of coffee was increased by 67% to 1,500 CFA francs per kilogram, he said.
(Updates with additional comment from minister in last paragraph.)
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