Dockworkers are striking in the major exporting coastal city of San Pedro in Ivory Coast, disrupting the normal flow and loading of cocoa beans destined for markets around the world. Strikers are protesting for higher wages and have blocked roads used to transport cocoa beans to port. As a result, arrival figures since the start of the season, Oct. 1, are falling behind last year’s tally and will likely continue to do so until the strike ends.
Concern is growing that protests could spread to the neighboring city of Abidjan, further crippling the movement of beans. Although safety stocks of beans are ample, an extended strike could jeopardize stocks of cocoa beans around the globe. It is important to highlight that though the supply of beans is intact, bean stocks are rising up-country but not necessarily under optimal conditions to preserve their quality.
Adding to supply chain woes, Ivory Coast and Ghana regulators have set a Nov. 20 deadline for buyers and exporters to agree to payments of both cocoa premiums. The first premium is the Living Income Differential (LID), introduced two seasons ago to lift the income of farmers and improve livelihoods. The second premium is the traditional bean premium or differential paid to farmers based on the quality of their cocoa.
The traditional premium had suffered after the LID’s introduction and often traded at a steep discount or negative implied differential. Regulators are now saying buyers must agree to pay both premiums and that cocoa would no longer be offered at negative implied premiums. If buyers are unwilling to pay both premiums, regulators are threatening to suspend certification of sustainability programs—cutting off access, in other words, to cocoa certified as sustainable.
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