Cocoa prices are consolidating above recent lows after the commodity remained on the defensive over the past five weeks owing to improving supply outlook. Akin Laoye, CEO of FTN Cocoa joins CNBC Africa for more on the oscillating price movements, demand for chocolate and outlook for the market.
Akin, thank you for joining us today. Thank you for having me. It's quite interesting to see prices climbing back up, and even more importantly, the supply outlook appears to be increasing, and also the demand for chocolate and outlook for the market is increasing. Thank you for having me. It's quite interesting to see prices climbing back up, and even more importantly, the supply outlook appears to be increasing, and also the supply outlook appears to be increasing, and also something interesting that I saw, there's a global cocoa surplus of 142,000 metric tonnes for the 2024-2025 season. How are you processing these recent developments? Well, I think the development is as a result of slow demand as well, in terms of cocoa beans, because the high prices have affected, has translated into high prices of chocolates, and of course that has impacted demand. So, most of the buyers are watching the market, and I believe that is the reason why we have this passive surplus. Nothing, it has nothing to do with increased production or something, I think it's on the demand side. Alright, and while all of that is happening, we're still keeping an eye on, of course, the two biggest producers of cocoa, especially in Cote d'Ivoire, and what we're seeing and what we're hearing is that the country will slash, and this was announced recently, the country plans to slash the amount of cocoa it sells to the international market from the upcoming crop. So, it's going to limit contract sales to 1.3 million metric tonnes from 1.7 million metric tonnes. According to the country's cocoa regulator, they're trying to play it safe in terms of being able to actually honour those contracts. And they continue to point to the green, or the cocoa shoot disease that continues to plague plantations across Cote d'Ivoire. What are your thoughts on this, and especially in terms of how the country has been able to tackle this particular issue with the cocoa crop? Well, I think what Cote d'Ivoire is trying to do is to increase the processing capacity of their country, and therefore having control over the prices of what's going on in the international market. But be that as it may, I think that strategy works if every other African country would move in that direction – Ghana, Nigeria, Cameroon – then we can see a situation whereby we're in control of the supplies into the international market, and therefore we will now enjoy the right pricing of our product. But anything short of that will mean, because it's a perishable item, it's agricultural produce, this thing is sent into the international market, and people are under pressure. And then the prices will definitely cool down. And what about Nigeria, in terms of what we are producing at the moment? I know that for January this year, Nigeria's cocoa exports rose 27% to over 46,970 metric tonnes. What is the plan to ramp up production and even exports? Well, in terms of production, let me put it this way. It is not easy to just ramp up production like that. You need two years, three years for the crop to grow. So what I think is happening is that there is some movement of cocoa around the world, around West Africa. I believe some of the cocoa in Ghana is finding its way to Nigeria. And that's probably what we are going to see in days to come, or in weeks to come, because the Nigerian market is deregulated while that of Ghana and Côte d'Ivoire is controlled, and therefore the farmers are not getting a feel of the right pricing. And people feel that it's better to send into Nigeria and get more. Otherwise, there's nothing we can actually do, except there is a deliberate effort at increasing our capacity in terms of the farm acreage that we open up. And in that same vein, what should the policy makers do? What kind of policies do we need now while we try to ramp up production to help speed up the process? Take control of some things. Number one, ability for farmers to have access to land. Number two, ability to get access to funds so that the cheap farmers can access the market. That way, I believe, things can get better. But if government is staying aloof and they're not intentional about the way these things are managed, there's nothing we can really do. We just be spectating as these advantages are coming up. For example, just look at what's going on. The prices are very high, which is very good for the farmers and good for our economy. But if nothing is done, this is the way we continue to look at this thing for the next few years. But I'm sure a lot of people, cocoa is becoming a sweet spot. A lot of guys want to go into that sector. Some young people want to go into the farming now. Government should really, really be focused on this, encourage them, give kind of subventions to assist them. For example, look at our graduates. I mean, I see no reason why government shouldn't latch into this advantage now. Get these guys off the streets, take them to the farm, farm plantations, give them access to seedlings, access to capital. Let them farm. After three years, you start having the advantage in terms of output of the crop in Nigeria. All right, we'll leave it there. Akin, thank you so much for talking to us on the latest updates at the cocoa market. Akin Lari, CEO of FCN Cocoa.
Theme: Analyzing Cocoa Market Trends and Supply Dynamics
Cocoa prices are currently on the rise after remaining under pressure for the past five weeks, as the supply outlook for the commodity improves. Akin Laoye, CEO of FTN Cocoa, provided insights into the recent developments in the cocoa market during an interview with CNBC Africa. Laoye highlighted that the increase in prices is accompanied by a rise in the supply outlook and demand for chocolate. However, he attributed the global cocoa surplus of 142,000 metric tonnes for the 2024-2025 season to slow demand due to high chocolate prices impacting consumer buying behavior. The surplus is not a result of increased production but rather a consequence of reduced demand in the market. One of the key factors influencing cocoa prices is the production decisions of major cocoa-producing countries like Cote d'Ivoire. Laoye discussed Cote d'Ivoire's plan to reduce the amount of cocoa sold to the international market in the upcoming crop season. The country aims to limit contract sales to 1.3 million metric tonnes from 1.7 million metric tonnes to ensure that it can fulfill its commitments. Cote d'Ivoire's strategy is driven by the need to control prices in the international market and enhance its processing capacity. Laoye noted that for this strategy to be effective, other African cocoa-producing countries like Ghana, Nigeria, and Cameroon need to adopt similar measures to collectively influence global cocoa prices. Nigeria's cocoa exports have seen a 27% increase to over 46,970 metric tonnes in January this year, indicating a potential shift in cocoa movement within West Africa. Laoye suggested that some cocoa from Ghana may be finding its way to Nigeria due to market dynamics, as Nigeria's deregulated cocoa market offers better pricing incentives for farmers. However, Laoye emphasized that significant increases in production require long-term planning and investment in farm acreage expansion. Policy interventions focusing on land access and financial support for farmers are essential to accelerate production growth and support the cocoa industry's development. In conclusion, Laoye underscored the importance of government policies to facilitate the expansion of cocoa production and attract more young people into the sector. He called for initiatives that provide graduates with opportunities to engage in cocoa farming by offering access to resources such as seedlings and capital. By empowering farmers and incentivizing agricultural entrepreneurship, Nigeria can enhance its cocoa production capabilities and maximize the economic potential of the cocoa industry in the country. The cocoa market is experiencing notable shifts in supply dynamics and price movements, driven by global demand trends and production decisions in key cocoa-producing countries. As cocoa prices continue to fluctuate, stakeholders in the industry are closely monitoring developments to navigate the evolving market conditions and capitalize on opportunities for growth and sustainability.
"Government should really, really be focused on this, encourage them, give kind of subventions to assist them. For example, look at our graduates... Get these guys off the streets, take them to the farm, farm plantations, give them access to seedlings, access to capital. Let them farm. After three years, you start having the advantage in terms of output of the crop in Nigeria."
['Cocoa Market', 'Supply Outlook', 'Cocoa Prices', 'Chocolate Demand', "Cote d'Ivoire", 'Nigeria', 'Agricultural Policy']