Deficit in cocoa industry will affect West African market - CNBC Africa [object Object]

Deficit in cocoa industry will affect West African market

Western Africa

by Dara Rhodes 0

Shortfall in cocoa industry will affect West African market.

“I think what’s really been shown by the last season we just had is that [the] weather is the most important overriding factor for West Africa’s cocoa sector,” Edward George, Head of soft commodities, Ecobank.

After a shaky start last October, cocoa deliveries in the main producers steadily gathered pace throughout the season, before slowing down under the impact of a dry spell between June and August.

“What is impressive about Nigeria is that there has been a steady increase and improvement in production over the last three or four seasons. Nigeria is certainly on target to reach 250 000 tonnes. I know there were plans to reach 350 000 tonnes but everything has to be done stage by stage,” he said.

[video]

According to George, the government has given strong support to the sector particularly with the distribution of new hybrid varieties as they require less water and are resistant to certain pests.

“We are really seeing the sector on the rise in Nigeria and it is eclipsing the other important producer in the region which is Cameroun, which seems to be stuck in a long term decline,” he said.

With the expected deficit in cocoa globally and international cocoa prices set to strengthen in 2013/2014, West Africa’s pricing regime will come under pressure to increase farm gate prices which will squeeze the margins of the domestic processors.

“It is clear that there’s going to be some kind of deficit this season. In the new season 2013/2014, there are expectations of a global deficit of over 100 000 tonnes. What this means in real terms is that we are going to see prices going up,” George said.

In the last five years, a lot of the big trading houses have become vertically integrated supply chain managers. Effectively, they are not just trading the beans, they are getting involved in origination, they are getting involved in co-operatives, buying and processing.

“One of the biggest issues facing West Africa is investment in research development. One of the issues facing West Africa cocoa sector is that it’s totally dependent on the taste of Europeans. All of the cocoa products which are being produced are going to be sold off to European markets for European tastes. There needs to be required minimum distribution into products which are for African tastes and African markets,” he explained.

Comments