Cote D’Ivoire and cocoa: The facts

Posted by Josette Dunn on 31st January 2011

Cocoa prices this week shot up as the president-elect of Cote D’Ivoire announced an export ban amid political struggles in the country.

Europe’s confectioners and biscuit makers admitted that a temporary ban of cocoa shipments from the region, the world’s largest cocoa exporter, has created “a very testing time” for the industry. Here we take a closer look at the Cote D’Ivoire cocoa market and its importance globally.

* Côte d’Ivoire, also known as the Ivory Coast, is the world’s largest producer of cocoa, with more than 800,000 small-scale farmers. The country represents more than 40% of the world’s supply and 90% of its foreign exchange earnings, according to Unido.org.

Cadbury Fairtrade

* West Africa, collectively supplies around 72% of the world’s cocoa crop, but it is Côte d’Ivoire that leads production at around 1.3m tonnes, followed by neighbouring Ghana with 720,000 tonnes, according to the CIA World Factbook. Côte d’Ivoire overtook Ghana as the world’s leading producer of cocoa beans in 1978.

* The country is a major source of cocoa for major chocolate producers such as Cadbury, Hershey, and Nestle, who buy Ivorian cocoa futures and options through Euronext whereby world prices are set.

* In terms of cocoa exports, Cote d’Ivoire accounts for the largest share in West Africa with an estimated 37.1%, followed by Ghana (20.6%), Indonesia (13.1%), Cameroon (5.0%), Nigeria (4.6%) and Brazil (4.3%), according to IBSWorld Industry Report – Global Cocoa, Chocolate and Sugar Confectionery Manufacturing.

* Cocoa is a pillar of the Cote D’Ivoire economy, representing 15% of GDP and 35% of Côte its export income – worth around US$1.4bn in 2008 – and contributing 20% of government tax revenues, according to The Fairtrade Foundation. Around 1m cocoa farmers each produce an average of 1,300kg on 3ha of land and cocoa provides a livelihood for around 6m people, nearly a quarter of the population of 21m.

* Côte d’Ivoire’s crop levels have a huge influence on world cocoa prices – concerns about disruption to cocoa production and export during the civil war caused New York prices to soar to a 16-year high of $2,335/tonne in October 2002.

* Between 2005 and 2009, cocoa production averaged 1.4m tonnes per year. However, the 2009/10 crop is estimated to be around 1.2m tonnes, making it the worst harvest in five years, according to The Fairtrade Foundation.

* Under pressure from the World Bank and IMF, Côte D’Ivoire liberalised its cocoa sector in 1999. This ended the system of guaranteed prices and scrapped the state-run Caistab which controlled the sector, creating in its place a system of four specialised administrative agencies to promote and regulate production.

* These agencies are funded by cocoa taxes but have come under criticism for a lack of transparency and overlap within their functions and failure to improve incomes for farmers, according to The Fairtrade Foundation.

* In the current system, the government announces an official price during the season, but it is used only as a guideline and actual prices are determined by the domestic market. Combined with excessively high taxes, this means farmers receive less than 40% of the export price compared with 60% in Ghana, which has caused widespread discontent among farmers who claim they are being underpaid.

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