Cocoa exporters lament price slump

Exporters of cocoa are in a dilemma following continuing price slump in the international market.

Cocoa, a key ingredient in chocolate, a luxury food product, has also seen a decline in demand. It is among Nigeria’s leading agricultural exports and constitutes two per cent of Nigeria’s exports yearly.

In recent days, cocoa futures markets in London, New York and Amsterdam weekly, show prices per tonne ranging from $2250 to settle at $2,357.50, the National President, Federation of Agricultural Commodity Association (FACAN), Dr Victor Iyama, told The Nation that exporters hardly get $2000 per tonne.

He noted that the drop in global cocoa prices has hurt farmers, urging cocoa producers to map out ways to encourage more local processing.

Consequently, farmers are drying and conserving their produce while waiting for prices to increase.

He explained that the price of a tonne at the farm has gone up to N950, 000, making it difficult for exporters to make a profit.

“Even where the terminal markets are open like in cocoa, the price has really nosedived. The cocoa that most of us have bought for N960,000 plus Free on Board (FoB) charges that is going for over N1 million, if you sell you will lose between N350,000 and N400,000.

Another challenge is that financial and social pressure is forcing some farmers to harvest cocoa that is not ready and drying it under unhealthy conditions. The result is that prices will continue to be drastically reduced because the cocoa is of very poor quality.

In 2019, leading chocolate-makers agreed to a proposal from the African nations to charge the industry a premium for cocoa beans and guarantee a minimum income to farmers who earn just $1 daily.

But the scheme, which was set to come into effect in October, was based on expectations that international cocoa prices would stay within average ranges. Instead, the impact of the COVID-19 pandemic on demand has driven them to their lowest in nearly two years. The expectation was that the new pricing plan which guarantees farmers 70 per cent of a minimum of $2,600 a tonne target price from 2020/21 onwards, or about 20 per cent more than they receive.

With the situation in the market, Iyama noted that cocoa farmers might not be able to earn higher prices for their beans.

Across the country, cocoa farming has become an incredibly unpredictable business, and farmers bear the risk of losses caused by climate change and extreme weather patterns.

Iyama added that smallholder cocoa farmers also have virtually no control over global market prices and are at the mercy of price volatility.

Last year, exporters had 100,000 tonnes of cocoa beans being trapped at Nigerian ports due to Central Bank of Nigeria (CBN) documentation approval, which forces exporters to ensure that sales from export are repatriated to Nigeria.

Cocoa futures rose to above $2,400/tonne, after hitting a five-month low of $2,347/tonne in March, as traders weighed prospects of higher demand amid upbeat economic data for the US and Europe.