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July 26, 2010

New cocoa agreement is a positive move, producers say

by Isolda Agazzi

The new international cocoa agreement will provide a positive shake-up in the cocoa market and ensure better prices for stakeholders, including small farmers.

It also strengthens the participation of civil society and the private sector in the cocoa industry, according to Guy-Alain Emmanuel Gauze, Côte d'Ivoire's ambassador to the United Nations (UN) in Geneva and president of the UN cocoa conference.


The conference, which ended on Jun 25 in Geneva, negotiated an agreement which will replace the current one in 2012. The global export value of cocoa beans for 2009/2010 is estimated at some 10 billion dollars. Côte d'Ivoire is the main producer in the world - 40 percent of total production - with Ghana in second place.

Gauze regards the new agreement as "objective and balanced" as it strengthens the role of the International Cocoa Organisation (ICCO) and puts in place measures to achieve fair prices for the suppliers, including small farmers, transporters and exporters, and the consumers, including value-adders, importers, industrialists, negotiators and buyers.

ICCO is the organisation that administers and supervises the operation of the agreement.

Ghana expresses similar sentiments to Côte d'Ivoire about the new agreement: "I am happy and satisfied. I hope that member countries will ratify the treaty as soon as possible," says Anthony Nyame-Baafi, minister counsellor at the permanent mission of Ghana to the UN in Geneva.


"The concerns of producing countries have been taken into consideration. The agreement contains an elaborate definition of the objectives of a sustainable cocoa economy and promotes development projects. And, very importantly, it enhances market transparency."

Gauze stresses that, "you cannot define a marketing strategy if the market is opaque. You need data on world production and consumption, stock variations, and trade in derivative products such as butter, powder and liqueur."

Therefore, countries have agreed to create an economic committee that will examine statistical data, consumption, production, stocks and everything else that contributes to price determination. Producing and consuming countries, nongovernmental organisations (NGOs) and the private sector will be represented on the committee. Gauze calls it "a huge novelty."


Cocoa has been one of the rare soft commodities, together with coffee, that has resisted the effects of the economic and financial crisis of 2008-2009. In 2009, prices increased between 30 and 60 percent on the London and New York markets.

"Financial markets have invested in agricultural commodities and prices have gone up," explains Gauze. "This happened partially because of the decline in supply from producing countries and the increase in demand in emerging economies."

Gauze regards the investment in commodities as "a good thing because it drives prices up. But extreme speculation is dangerous since it can bring prices down. We have to see how to react to extreme speculation, perhaps by regulating markets."

Côte d'Ivoire has put policies in place to ensure that price increases benefit small producers too.


"In Côte d'Ivoire, cocoa represents 35 percent of national exports. When prices are good, the country earns a lot of money, so small farmers must be compensated too. In all producing countries, governments are aware of that. Prices paid to small producers have been on the rise for the past four to five years," says Gauze.

Nyame-Baafi adds that, "this accord should ensure fairer prices for Ghana's producers because the importing countries have given the assurance that there will be transparency in data, from both private and public sources. Our farmers will have up-to-date information on consumption of cocoa and the use and prices of the main products."

His hope is that this new development will boost the income of farmers and even contribute to the achievement of the millennium development goals.

Another significant advancement is that the new agreement forbids the use of alternative products, not only of cocoa butter, as the current one does, but also of all other derivatives - liqueur and power - and of cocoa bean.


Producing countries are particularly satisfied with this provision, continues Gauze, as it will boost production and increase prices. "On the international market, the price of cocoa butter is already three times higher than that of shea butter and four times that of palm oil."

The agreement strengthens the cooperation between member countries; NGOs; the private sector; funding agencies such as the Bretton Woods institutions; and development agencies such as the Common Fund for Commodities, an inter-governmental financial institution established within the framework of the UN.

Cocoa does not belong to governments alone any more, states Gauze. "All those who have expertise in sustainability are welcome as long as they make valuable contributions. Producing countries, by accepting the concept of sustainability and the proposal by consuming countries to include NGOs, have proven their political courage."


IPS

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