While some observers currently fear a structural deficit in cocoa supply, Dr. Jean-Marc Anga, the Executive Director of the International Cocoa Organization (ICCO), is more concerned about its price hyper-volatility. He recommends a world cocoa summit to fix the situation.
“Our problem in the next few years is not the threat to cocoa supply per se, but rather the lack of strategic vision and coordination between supply and demand, which feeds price volatility and the uncertainty that it creates, leading to peaks followed by collapses in cocoa prices. This is what we, at the ICCO Secretariat, call the ‘boom and bust’. And this is what we must avoid at all costs,” added Dr. Anga in his article published in early October in the magazine Jeune Afrique.
As we pointed out in a previous article1, cocoa prices are indeed experiencing periods of extremely high volatility, which has been exploited and intensified by some speculators taking control of over 10 percent of global production. The commodity offers an even more speculative interest since prices have recently reached especially high levels.
These soaring prices are good news for producers, provided they stand the test of time. Yet during the past few decades, the world’s cocoa economy has alternated between demand deficits and supply surpluses, leading to extreme price fluctuations and disastrous consequences for major producing countries. As the Ivory Coast’s key economic resource, cocoa and coffee represent 40 percent of export revenues and 20 percent of GDP. In Ghana, cocoa accounts for a third of total exports and the government indicates that it supports close to half of the local population.
In order to address issues of food security as well as economic and political stability, it is therefore urgent to curb excessive price instability and provide farmers with lucrative prices and adequate revenues. That is the proposal made by ICCO, which calls for a world cocoa summit to be held in mid-2012 to tackle these issues.
1 Please see momagri September 6, 2010 article “Cocoa: One isolated speculator dramatically raises world prices” http://www.momagri.org/UK/a-look-at-the-news/Cocoa-one-isolated-speculator-dramatically-raises-world-prices_734.html