Title: Cocoa market control 2020
Authors: Christopher Gilbert - Johns Hopkins University (Italy) [presenting]
Abstract: Cocoa is priced against the ICE cocoa contracts traded in London and New York. Ghana and Cote dIvoire account for slightly in excess of 60\% of world cocoa production. The cocoa price remains low, mainly as the consequence of increases in Ivorian production. The two governments have announced a plan to boost cocoa revenues by requiring exporters to pay a minimum differential of \$400/ton (around 22\%) over the London futures price. There are major issues as to whether and how this requirement can be enforced. We look at the consequences of the scheme if it can be successfully implemented. If effective, this scheme would drive a wedge between transactions and exchange prices. The result would be similar to the recent wedge between aluminum exchange and transactions prices resulting from loadout delays from exchange warehouses. We consider the implications for cocoa futures prices, for the differentials obtained other origins, at likely impacts on hedge effectiveness and at the possible impact on Ghanaian and Ivorian farmers.