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Last Friday, the government of Ghana set the minimum price it would pay farmers for the 2011-2012 harvest at US$2000/MT.

The price of the beans has been falling on global markets and the government has “sacrificed part of its export tax share” to help farmers, Finance Minister Kwabena Duffuor said at a news conference [Friday, Oct 14] in Accra, the capital.

[FYI, the market price for cocoa on Friday was US$2664.96/MT down from US$3471/MT just this past February. World market commodity prices have been consistently above US$2000/MT since November, 2007.

I wonder if there is any "coincidence" in the Ghanaian government setting the floor at the same price as the FT floor and wonder what the floor is/was prior to this announcement. It also makes you wonder what the real differences are between the farm gate prices, the local market prices, any government-controlled pricing, and the export/world market prices.

It's a lot more complicated than a single number.

[On-line source for cocoa bean pricing.]

Notes about pricing in neighboring Ivory Coast.

See also this Reuters story on the Ivorian government ending consultations with cocoa exporters and farmers on planned reforms to the sector that will guarantee its hundreds of thousands of smallholders a minimum selling price.

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Actually it's pretty much the same as last year, the farmer price "increased" from 3,200 to 3,280 GHC per tonne, which is just above 2,100 USD. That's pretty much 75% of the international market price, but bear in mind that (1) Ghana cocoa sells at a slight premium and (2) high inflation will erode the real farmer price pretty fast (those 3,280 GHC today are already worth 5% less than 3,200 GHC twelve months ago)!

i find it hard to believe that an actual farmer....at his farm... no transport costs......for average, bulk, fermented to 70% forastero beans........ is receiving over $2000?!?!?!?  seems like that would imply a pretty rich farmer by local standards.  I could believe that a middleman who undertakes the risky and costly transport between farm and port could get that......maybe.  is this really true?  Laurent are you on the ground there?

 

while incredulous i certainly hope its true.  I am 100% all for farmers making good money on their beans.

 

brian

They are, I was still there two months ago. The farmer price is set by the Ghana Cocoa Board for the season and buyers stick to it as they are guaranteed a margin by the government (which buys cocoa from them at a higher fixed price): the more they buy, the more money they make. As a result they'll compete for volumes rather than pay low prices to farmers!

In Vietnam the farmers we buy from get paid London market price at the farm from the big bulk buyers. They get daily text messages on their mobile phones indicating the day's market price from the local Armajaro buyer and from the local Cargill buyer. A textbook example of competitive market making...

This just in from Bloomberg-Business Week:

Credit Suisse AG reduced its three- and 12-month cocoa price forecasts as the commodity is still “expensive” and the technical picture “looks weak.”

Cocoa will be at $2,550 a metric ton on ICE Futures U.S. in New York in three months, down from a previous estimate of $2,700 a ton, the bank said in a monthly report e-mailed today. The chocolate ingredient’s price is seen at $2,350 a ton in 12 months, down from $2,400 a ton forecast last month, it said.

That's down about 30% from the all-time high less than a year ago. Scary.

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