Global Chocolate producers are extremely worried as cocoa and chocolate products are expected to skyrocket on the global market due to the plan by Ghana and Ivory Coast to form a Cocoa Cartel that fixes its own price.
According to the Wall Street Journal and several international news outlets such as ABC News in the United States, the extra premium of US$ 400 per metric tonnes being asked by the Ghana/Ivory Coast Cartel will cause an increase in export prices of cocoa beans.
“…at least one major cocoa processor expects to pass that increased cost along to consumers…. If you’ve given up sweets in the new year, that may be a good thing as the cost of chocolate could be going up,” an ABC News report read.
The new cocoa cartel is being dubbed “COPEC” in a mimic of a similar cartel in the crude oil industry-Organisation of Petroleum Exporting Countries (OPEC).
The cocoa cartel was consummated in 2018 when Ghana and Ivory Coast which produces more than 60 per cent of global cocoa stock, teamed up to demand better prices for its farmers.
The two countries initially proposed a minimum price for their cocoa of $2,600 when the world market price was around US$ 2,200 per metric ton during meetings with representatives of the chocolate industry.
However, executives from a group of multinational cocoa and chocolate companies pushed back against the asking price, saying the policy lacked clarity and could create havoc in the market.
Instead, the chocolate industry agreed to the US$ 400 premium added on top of the futures market price, which they said would be more straightforward. Ghana and Ivory Coast dropped the proposal to set a minimum price for buyers and decided to charge a premium.
The new premium charge “is essentially a $1.2 billion tax on the cocoa industry,” said Eric Bergman, vice president at brokerage JSG Commodities Inc.
Ghana and Ivory Coast produces about 3 million metric tonnes annually compared to the 2 million metric tonnes produced by the combination of more than 10 other top producers such as Nigeria, Peru, Ecuador, etc.
According to the World Bank, 80% of cocoa farmers, or four million people and their families live on less than $3 a day. That statistic hasn’t shifted significantly in years. While cocoa prices go up and down on the international market, living costs for farmers have steadily risen, says the World Bank.