Côte d’Ivoire: Boosting cash crops
Côte d’Ivoire’s cocoa-growing season was off to a fresh start in the first week of October. Beginning this growing season, the government has set a fixed price for cocoa sales, in addition to establishing other efforts aimed at promoting the country’s cash crops.
The national government kicked off the cocoa-growing season by announcing that all producers would receive a guaranteed price of CFA725 (€1.11) per kg, which is 60% of the international price. This reform was implemented largely due to IMF stipulations. In return for providing the country with some $3bn in loan forgiveness as part of the Heavily Indebted Poor Countries Initiative, Côte d’Ivoire’s government agreed to implement stricter regulation of the cocoa segment.
The IMF believes that measures such as fixing the price of cocoa will provide a greater degree of economic stability for the country. Proponents of the regulation also argue that, given Côte d’Ivoire’s domination of the international cocoa market, setting a fixed price nationally may also allow the country to significantly influence the global price of cocoa.
Côte d’Ivoire is the world’s leading cocoa producer, accounting for approximately 40% of global output, or around 1.5m tonnes of beans per year, and is home to around 1m cocoa producers. Any fluctuation in the commodity’s price is felt almost immediately, and fluctuations are quite common. In November 2011 cocoa prices rose to €2175 per tonne, followed by a sharp drop at the end of the year, and then slowly regained strength in August 2012.
While the government had previously attempted to use indicative prices to establish greater price stability in the sector, this was largely ineffective. In the 2010-11 growing season, the indicative price for cocoa was CFA1100 (€1.68) per kg. In practice, however, cocoa was regularly purchased for a little more than half this price, at around CFA600 (€0.91) per kg, and sometimes even less.
While CFA725 (€1.11) per kg is a reduction from the indicative price in 2011, lawmakers argue that the ensured stability of a guaranteed price makes it a worthwhile trade-off for producers. The new regulation also stipulates that selling cocoa for any other price is considered illegal and punishable with prison time, in addition to having cocoa production and exportation rights revoked.
These measures were put in place to counteract contraband activities, perpetrated by local farmers attempting to sell their produce in nearby countries at higher prices. In Cameroon, for example, cocoa beans sell for around CFA1200-1500 (€1.83-2.29) per kg.
To ensure that the fixed price is enforced and the country does not miss out on tax revenue, the government has designed a sales receipt system that can purportedly be used to identify illegal sales.
While cocoa producers are generally supportive of the agricultural reform, some feel that their opinions were neglected in the price-setting dialogue and that more farmers should have been directly involved in the deliberation process.
In addition to cocoa reforms, the government recently launched the National Agricultural Investment Programme (PNIA). The PNIA is a programme aimed at promoting greater food security in the country, as well as supporting commercial farmers in efforts to develop more diverse cash crops.
Other cash crops appear to be performing well, with rubber in particular garnering attention and investment from the government. Rubber is arguably the biggest threat to the continued development of the cocoa segment, according to the Pulitzer Center’s reporting; while there is relatively little price discrepancy between rubber and cocoa, the growing period for rubber is longer – 10 months versus the six for cocoa – and the plant produces more, thus creating greater earning opportunities for producers.
Côte d’Ivoire is also a major cashew nut exporter. The country produces around 400,000 tonnes of cashews per year, exporting them mostly in an unprocessed state. However, the Regulatory Authority for Cotton and Cashew Nuts is working to change this by lobbying for the creation of greater processing infrastructure, with the end goal of processing around half total production.
While it may be desirable for agricultural producers to play a greater role in designing the reform framework moving forward, at least for the moment, Côte d’Ivoire’s work to boost local production in some crops and maintain price stability in others is a step in the right direction.