27 Apr

From Defaults to Poor Data, Cocoa Audit Shows Top Grower’s Woes

Ivory Coast’s cocoa regulator failed to prevent a crisis that sent prices plummeting last season, according to an audit of the world’s top producer by KPMG LLP.

Offering a rare glimpse into the workings of an opaque industry, KPMG shows how flaws in the West African nation’s sales system had a “catalyst effect” on the industry’s woes, according to a copy of the audit commissioned by the government and obtained by Bloomberg.

The crisis cost the country at least 185 billion CFA Francs ($333 million) in lost income, KPMG said. While reforms of the sector in 2012 were supposed to protect cocoa farmers from global swings, the last annual season that ended in September showed producers remained vulnerable.

Prices started tumbling amid forecasts for an oversupply, triggering a wave of defaults by local exporters which couldn’t fulfil their contracts because they had bet on higher prices.

A slow response from Ivory Coast deepened the rout and resulted in farmer pay being cut by more than a third.

KPMG and Yves Brahima Kone, head of the regulator known as Le Conseil du Cafe-Cacao, declined to comment.

These are the report’s main findings and recommendations:

1. Defaults

After prices reached a six-year high in July 2016, local shippers who speculated on further gains were caught wrong-footed.

The audit showed 32 exporters defaulted on 222,302 metric tons of cocoa, about a fifth of sales usually made ahead of the start of the season. Smaller exporters from groups known as Pmex and Coopex accounted for 68 percent of the unfulfilled contracts.

The defaults forced Ivory Coast to reauction beans, putting further pressure on prices. The CCC allowed some defaulting companies to continue making purchases, raising the risk for the current season, KPMG said.

The biggest defaulters during last season were Nocoacy with contracts for 35,975 tons, Saf Cacao with 15,000 tons and 2CICS SA with 14,900 tons, according to the report. Saf Cacao had also defaulted on 7,425 tons in the 2015-16 harvest, it said.

To read the full article, click here.

16 Mar

Ivory Coast Is Selling Africa’s Biggest Euro-Currency Bond

Ivory Coast sold 1.7 billion euros ($2.1 billion) of bonds Thursday in the biggest issuance in the common currency from an African government, according to a person familiar with the matter.

The West African nation’s amortizing deal was equally split between a tranche maturing in 2030 and paying 5.25 percent, and another due in 2048 with a yield of 6.625 percent, said the person, who asked not to be identified as they’re not authorized to speak about the matter.

Price guidance was around 5.375 percent for the shorter securities, which have an average life of 11 years, and 6.75 percent for the longer ones, which have a 29-year average maturity, said the person.

That’s the largest amount of euro debt issued by an African sovereign since at least the start of this century, when Bloomberg began compiling the data. It was also the second-biggest transaction in the currency from emerging markets this year, after Romania’s 2 billion euro-deal on Feb. 1. Investors placed 4.2 billion euros of orders, said the person.

Calls for comment to government spokesman Bruno Kone and Finance Minister Adama Kone went unanswered.

The world’s largest cocoa producer followed Egypt, Nigeria, Kenya and Senegal in tapping international markets before policy-tightening by the U.S. Federal Reserve lifts borrowing costs.

African sovereigns have now issued $12.8 billion of Eurobonds in 2018, already more than half the record $18 billion they managed last year and exceeding the total for the whole of 2016.

BNP Paribas SA, Citigroup Inc., Deutsche Bank AG and Societe Generale SA managed Ivory Coast’s sale.

Yields on the government’s 625 million euros of securities due in 2025, its only other bonds in the currency, fell four basis points to 4.26 percent by 8:52 a.m. in London.

Source: https://www.bloomberg.com/news/articles/2018-03-15/ivory-coast-is-said-to-sell-africa-s-biggest-euro-currency-bond

28 Feb

Ivory Coast Lost 125,000 Tons of Cocoa to Smuggling

Ivory Coast lost an estimated 125,000 metric tons of cocoa this season through the smuggling of beans to neighbouring countries where farmers and traders are paid better prices, according to two people familiar with the matter.

The industry regulator of the world’s biggest cocoa producer estimates that the country lost as much as 100,000 tons through its eastern border with Ghana and another 25,000 tons through the western boundary with Liberia and Guinea, said one of the people, who asked not to be identified because the information isn’t public.

One of the biggest cocoa buyers in the country made a similar forecast, said a second person.

The estimates were calculated by subtracting the border regions’ port deliveries from the average of previous harvests.

The total is the equivalent of 9.2 percent of arrivals since the beginning of the season in October through Feb. 25, according to government data.

Mariam Dagnogo, a spokeswoman for Le Conseil du Cafe-Cacao, the regulator, didn’t answer calls seeking comment.

Ivory Coast is struggling to contain cocoa smuggling this season after the country lowered the minimum price for farmers by more than a third to the equivalent of $1,314 per ton as international contract prices declined.

The change opened an unusual payment gap with Ghana, the second largest cocoa producer, which left its minimum producer price unchanged at the equivalent of $1,700 per ton.

The government and regulator will review border security ahead of the smaller
of the two annual harvests which begin in April, said one of the people.

Source: https://www.bloomberg.com/news/articles/2018-02-27/ivory-coast-is-said-to-lose-125-000-tons-of-cocoa-to-smuggling

27 Feb

Ivory Coast Cocoa Farmers Get Relief as Rains Return Early

Cocoa farmers in Ivory Coast, the world’s top producer, got some welcome relief in the past week with higher-than-normal rainfall across the main growing regions.

It rained heavily on Wednesday night for more than six hours, said Robert Glaou, a farmer in the western town of Bangolo. Harmattan conditions have ended, he said, referring to winds from the Sahara that bring dry weather and coolness to West Africa from December to February.

“The weather is currently very good,” said Narcisse Konan, the head of a cooperative in southwest Ivory Coast. “There were small pods on the trees and we needed some rain to make them stronger.” The Harmattan overall was very mild this year, he said.

Ivory Coast is nearing the end of its main crop, the larger of two cocoa harvests that runs from October to March. The rain will help development of the smaller mid-crop, although wet weather tends to slow harvesting.

Satellite imagery from the U.S. Climate Prediction Center for Feb. 18 to 24 suggests well-above-average rainfall across Ivory Coast, as well as the biggest-producing regions of neighboring Ghana, the No. 2 grower.

“It has been raining in the area for several days,” said Jeannot Assi, a farmer in the southern town of Alepe, in Ivory Coast. “We are now seeing flowers and small pods” on the trees.

There has also been heavy rain in Tiebissou, in the center of Ivory Coast, that will allow the trees to bloom, said farmer Moussa Kouassi. Growers have begun maintenance work for the mid-crop harvest, he said.

While the weather has improved, harvesting volumes have decreased as the main crop peters out and farmers in the west and southwest said they’ve seen bean size and quality deteriorate.

“The beans are small,” said Vincent Zadi, a farmer in Grand Zatry, in the southwest. More rains are needed to help the cocoa trees to bloom and produce small pods, he said.

To read the full article, click here.

27 Dec

Mild Desert Winds Spell Good News for Cocoa Crop in Top Producer

A record crop in biggest producer Ivory Coast helped push the cocoa market into a surplus in the 2016-17 season. Prices tumbled and are headed for a second annual decline.

With the 2017-18 season now well underway, all eyes are on the main crop, the larger of two yearly harvests that runs from October through March. Now is a crucial time as the harvest’s at its peak. The Harmattan, dry desert winds from the Sahara, usually blow from December to February and can have a big impact on crops in Ivory Coast and neighbouring Ghana.

Regulator:

Ivory Coast’s cocoa regulator, Le Conseil du Cafe Cacao, has increased its forecast for the 2017-18 main crop harvest to 1.4 million to 1.45 million tons from a previous 1.35 million tons, a person familiar with the matter said last week.

Good rains in the past few months mean that production will probably be higher than anticipated for the second part of the main crop, starting in January, said the person, who asked not to be identified because the projection hasn’t been made public. The forecast assumes that the Harmattan remains mild and doesn’t damage cocoa pods.

Farmers:

After heavy rains in October and November, the Harmattan is now underway in most of the cocoa-growing regions. But it’s been mild so far and it’s often mixed with light rains, said Joseph Gueu, a farmer near Danane in the west of the country. That’s unusual for this time of year. Output has been good so far and young pods are growing well, he said.

Not everyone is so positive though. Too much rain has resulted in brown rot on many pods and reduced production said Alassane Sogodogo, who manages a cooperative near the Liberian border. The rain also damaged roads in the area, making it difficult to send cocoa to the port. The weather has since improved, he said.

To read the full article, click here.