Mixed outlook for West Africa’s 2015/16 cocoa season


As the 2014/15 cocoa season (September-October) draws to a close, West Africa has defied all expectations with what is expected to be the region’s third largest harvest on record. Total production is estimated at 2.929 million tonnes, only 6.9 percent down from the near record 2013/14 season.
Robust outturn was driven by Côte d’Ivoire which is on track for another record outturn, surpassing its previous peak of 1.74 million tonnes last season. Arrivals at Abidjan and San Pedro ports reached 1.766 million by September 27, with a sell-off of beans by farmers to pay for school fees and the Muslim holiday Tabaski boosting deliveries at the tail end of the season. This helped to offset Ghana’s disastrous 2014/15 season, which Cocobod estimates at 723,762 tonnes, 21.3 percent down from last season, owing to a perfect storm of cyclical and structural factors. Cameroon and Nigeria’s 2014/15 seasons also had differing fortunes. Cameroon’s cocoa production increased to 232,000 tonnes, up 10.2 percent from last season, while Nigeria’s outturn stayed flat at 250,000 tonnes.
Analysts say West Africa is unlikely to sustain this level of production, with output set to fall marginally in the 2015/16 season. ‘The downturn will be driven by Côte d’Ivoire, its 2015/16 output is forecast to decrease by 100,000 tonnes for a total crop of 1.65 million tonnes, reflecting a cyclical downturn, erratic weather and the potential impact of El Niño,’ Ecobank analysts said in a research note. Given that cocoa is a tree crop with a cyclical production cycle, Côte d’Ivoire is unlikely to sustain a third consecutive record crop, after its two last bumper crops. In addition, unusually dry weather in the lead-up to the main crop has hindered pod development, which could significantly reduce the size of the main crop, causing December arrivals to tail off. A final negative factor is El Niño, which could intensify the seasonal Harmattan between December and March, hampering the development of the mid-crop.
‘However, we do not expect Côte d’Ivoire’s downturn to be severe, as there are positive factors supporting output in 2015/16. The gradual entry into production of a new generation of trees in the north-west, which were planted following the price boom of 2011 and in the following years under the new fixed price regime, will help mitigate in any cut in output,’ the analysts added.
Many of these trees are the new Cacao Mercedes variety, which is high yielding and resistant to diseases and drought. Cocoa production from protected forests (forêts classées), which is continuing unabated despite government plans to progress with evictions of farmers later this year, is another bullish factor. The level of output from these areas is unknown as they are not included in seasonal pod counts by traders. While recent dry weather has raised concerns for the crop’s health, its impact could be mitigated by the cold spell upcountry which has helped retain soil moisture.
The farmgate price, which is expected to rise to a record CFA1,000/kg this season, will further incentivise farmers to improve husbandry and harvest every available bean. ‘Given the balance of negative and positive factors, we expect an overall decrease of 100,000 tonnes in the main crop, producing a main crop of 1.1 million tonnes. However, there could be a potentially large drop in the mid-crop should weather conditions worsen during the final quarter of the year,’ the analysts said.
In contrast to its western neighbour, Ghana is expecting a strong rebound in its crop in 2015/16, following this season’s surprise slump. According to Cocobod, total outturn for the 2014/15 crop will reach 723,762 tonnes, 21.3 percent down from last season. Many explanations have been proposed for the precipitous fall in production, from the late delivery of fertiliser and fungicides, to an unusually strong Harmattan and unseasonal showers washing away flowers, to the lack of labour caused by the growth of informal gold mining (galamsey).
But industry watchers remain divided over the true causes, given that none of the pod counts carried out before the 2014/15 season indicated any unusual concerns. Cocobod has acknowledged that Ghana’s aging cocoa tree stock is partly to blame for the slump, estimating that 40 percent of trees are unproductive, with 23 percent being over 30 years old and 17 percent crippled by swollen shoot or black pod. This has spurred a replanting programme on the part of Cocobod, which, coupled with the distribution of free fertilisers and the continuation of its mass spraying programme, will boost production in the 2015/16 season.
An expected increase in the fixed farmgate price will lend further support to a recovery. However, any increase in the crop will be undercut by the need for Cocobod to hold back up to 200,000 tonnes of cocoa to cover contracts from the 2014/15 season. ‘Overall, we expect a modest rebound to around 800,000 MT in 2015/16, with the risk, as in Côte d’Ivoire, of a weaker crop should weather conditions worsen towards the end of the year,’ Ecobank analysts predict.
West Africa’s other major cocoa producers – Nigeria and Cameroon – have struggled to increase output. Nigeria is well short of its long-term target output of 500,000 tonnes, and is still producing less than it was in the late 1960s and early 1970s. Cameroon’s output has also failed to grow noticeably over the past four seasons, owing to dry weather and structural constraints, producing a 2014/15 crop of 232,000 tonnes.
The downtrend is expected to continue in the 2015/16 season (August-July), with Nigeria and Cameroon both facing a drop in output to 210,000 tonnes and 200,000 tonnes, respectively. Dry weather early in Nigeria’s 2015/16 season stunted pod development and delayed the harvesting of the main crop in the southwest cocoa belt. This was followed by heavy rains, which caused an outbreak of black pod and hindered bean drying. Cameroon’s outlook has also been clouded by dry weather and a cyclical downturn.
A key factor in determining the health of Côte d’Ivoire and Ghana’s 2015/16 crop will be fixed farmgate prices. Côte d’Ivoire has steadily increased prices since 2012/13, and is expected to raise them to CFA1,000/kg in 2015/16, in response to high international prices and the presidential election in October.
The increase in price has been gratefully received by farmers, who are earning better than they have been for decades. But the high nominal price masks a bitter reality. The weak Euro, to which the CFA Franc is pegged, coupled with strong international cocoa prices, have actually reduced the farmgate price in $ terms, from 64 percent of the average international price in 2012/13, to below 50 percent in 2014/15.
The situation is similar in Ghana. In 2014/15 Cocobod almost doubled the fixed price to GHC5,520, to take account of high domestic inflation and strong international prices. But persistently high inflation, which averages 17.3 percent, and the volatility of the Cedi, have reduced the real value of the fixed price from 56.2 percent of the average international price at the start of the season (ahead of Côte d’Ivoire), to 45.9 percent at end-August.
‘In order to reverse this trend, Cocobod will need to substantially increase fixed prices in 2015/16, which will be difficult given the constraints of Ghana’s IMF-mandated fiscal programme. If Cocobod cannot raise the price sufficiently, this could create incentives for farmers to smuggle their beans to Côte d’Ivoire in search of better prices,’ Ecobank analysts said.
Although the outlook for West Africa’s 2015/16 cocoa crop is on the whole positive, with only a small reduction in the total crop expected, several risks hang over the forecast. The first is the potential impact of the El Niño weather phenomenon, the strongest since 1997-98, which has historically been associated with a drop in regional production. During the strong El Niños of 1965-66, 1972-73 & 1982-83, the crop fell sharply, both during the affected season and in the following two seasons.


Please enter your comment!
Please enter your name here