Macro Analysis /

Cocoa cartel's Brussels boycott signals higher prices

  • The world's leading cocoa producers, Cote d'Ivoire and Ghana, shunned the global cocoa meeting in Belgium

  • This signals a strengthening of the emerging cocoa bloc, the CIGCI, with Nigeria and Cameroon both looking to join

  • The bloc's unified power (70% of global supply) implies higher cocoa prices, which is positive for the producers

Cocoa cartel's Brussels boycott signals higher prices
Janet Ogabi
Janet Ogabi

Senior Research Analyst

Tellimer Research
4 November 2022
Published byTellimer Research

The world's leading cocoa producers, Cote d'Ivoire and Ghana, boycotted the World Cocoa Foundation 2022 Partnership Meeting (26-27 October) over the pricing of beans sold to the chocolate industry giants.

Ghana and Cote d'Ivoire together account for 60% of global cocoa production and are the sole current members of the Cote d'Ivoire-Ghana Cocoa Initiative (CIGCI), an emerging OPEC-style cartel – or 'Cocoa-PEC' – that the two super-producers founded in 2017.

Nigeria and Cameroon, who jointly produce 10% of the world's cocoa beans, asked to join the CIGCI in October. This would allow the countries to gain access to the bloc's US$400 living income differential (LID) premium pricing, which the CIGCI introduced in 2017 to improve the income of cocoa farmers and reduce poverty in that community.

Cote d'Ivoire and Ghana produce 60% of global cocoa beans

Ghana and Cote d'Ivoire raised their cocoa prices last month, due to tough weather conditions that threatened the harvest. Ghana increased its price by 21% from GHS10,560/tonnes to GHS12,800/tonnes (US$1,249) for the 2022/23 season and Cote d'Ivoire hiked by 9% to cUS$1,360/tonnes.

The price differential reflects Cote d'Ivoire's status as the biggest producer (40% of global supply versus Ghana's 20%) but leaves room for smuggling activities across the border, which has been a cause for concern in the two countries. Ghana's pricing also reflects the impact of the depreciation of the cedi, which has lost over 30% of its value so far this year.

Cocoa prices

If Nigeria and Cameroon join the CIGCI, the bloc would control 70% of world cocoa production, become even more effective in demanding better pricing and enjoy greater influence in the chocolate industry value chain. For context, OPEC accounts for c40% of world oil production and 80% of the world's proven oil reserves. Although the cocoa industry in the region is currently highly fragmented, which makes it harder to cooperate in price fixing, Cocoa-PEC' has the potential to drive the cocoa market in a similar way to the impact OPEC has on the oil sector.

More pricing control will benefit cocoa producers, especially as the cocoa market is estimated to close the 2021/22 season with a deficit of 230,000 tonnes compared with an oversupplied market in the previous season, according to the International Cocoa Organization (ICCO).