Can Ivory Coast & Ghana limit their cocoa output?

Ivory Coast raised its farmgate price 10 percent, while Ghana raised its farmgate price 8.4 percent. The market can read the announcements as a signal that the two countries are serious about coordination and cooperation. The question is whether they will have the resolve and capacity to deliver on their joint plans to curb cocoa production.

Cocoa officials have not shared details of the production cap, noting that legislative approval would likely be required to implement a supply ceiling. For now, the only detail known—presumably subject to change—is that Ivory Coast may seek to limit 2020/21 production to 2 million metric tons of beans.

The two countries had previously proposed a price floor on their cocoa for the 2020/21 season, eventually replaced by a US$400 per MT living income differential (LID) premium for farmers. A common criticism of such moves is that it would shift the supply curve for cocoa beans by encouraging cocoa production growth above what would be justified by demand growth at this time. There have also been concerns that higher cocoa prices could lead to demand destruction.

Cocoa production history for key origins


Source: ICCO
Posted by: Information Services
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