Singapore, 12th July 2019
Dear Members, All,
The Cocoa Association of Asia would like to update its members about the recent price developments in Ivory Coast and Ghana. The below information is simply reporting what has been discussed during the Abidjan technical meeting on 3rd of July. It is purely informative, there is no sort of advice of position taken by the Cocoa Association of Asia.
Following the Accra meeting on June 11th and 12th 2019, the Conseil du Café Cacao together with the Ghana Cocoa Board gathered again the main cocoa market participants in Abidjan on July 3rd 2019. This new meeting called “Technical Meeting” aimed at providing details of the floor price mechanism.
It was reported that:
- The floor price concept will be implemented through a fixed Living Income Differential (LID) of 400 USD/MT.
- Every contract sold by either Ivory Coast or Ghana for the 2020/2021 crop will include a fixed LID of 400 USD/MT.
- The LID is applicable on the full crop, i.e. both Main and Mid crops.
- Quality physical differential will be added on top of the Living Income Differential.
- The floor price defined at 2,600 USD/MT FOB is conserved and a minimum of 70% of it is to be paid to farmers.
- If sales contract value is above 2,900 USD/MT FOB in average, the excess amount is to be placed in a Stabilisation Fund.
Please see below a comprehensive chart based on the information given. We propose 3 different scenarios:
Scenario A: Selling price is above 2,900 USD/MT FOB. The excess value generated should be transferred to a Stabilisation Fund.
Scenario B: Selling price is above the floor price of 2,600 USD/MT FOB, but below the 2,900 USD/MT threshold.
Scenario C: Selling price is below the Critical Level of 2,200 USD/MT FOB. The Stabilisation Fund should kick in to compensate and keep the minimum price paid to farmers.
Please note that quality differential is purely indicative. It has been added for easy understanding but does not reflect any concrete situation.
We will keep our members informed.
CAA Executive Committee