Cocoa is a major agricultural commodity. Unlike tea and coffee, cocoa is viewed as a luxury among most people. As a result, the demand for cocoa-made products like chocolate has increased, partly because of the increased demand by Asia and other emerging markets. There is also demand in the developed countries of Europe and United States.
In these countries, the price of chocolate bars has continued to go up. The paradox of this is that the price of cocoa beans has not risen as much. As such, the farmers who grow the crop have continued to remain being among the poorest people in earth. More than 60% of the world’s cocoa is grown in Ghana and Ivory Coast.
It is against this backdrop that the two countries are having an OPEC moment. OPEC was formed to ensure that there was not too much supply of crude oil and to ensure that the prices remained stable. Over the years, OPEC, which produces more than 30 million barrels of crude oil every day has succeeded in ensuring the price stability of the commodity. Similarly, Ghana and Ivory Coast farmers have shown the interest in forming such a body.
The two countries have decided to build large warehouses to store the surplus cocoa beans. They are also considering setting a floor for the price of cocoa. The goal is to ensure that the farmers get the best prices for their produce. The two countries will hold meetings with stakeholders on 11th June and on June 18 to discuss some of these measures.
However, past efforts to control this price have failed because of the level of poverty in the two countries and the nature of corruption. The big buyers such as Hershey’s and Mondelez have in the past used tricks to bypass such measures.
The two countries usually use futures to sell the cocoa. They sell the cocoa to the buyers before planting, which guarantees them income. This measure will likely be discussed because experts believe that the farmers are getting a raw deal.
In the past few months, the price of cocoa has been trading within a range as shown below. The high of the range has been $2447 while the floor has been $1985. On the chart below, the price is along the 25-day and 50-day moving averages. The price is also between the range described above. The pair will likely maintain this range ahead of the meetings expected next month.