[ 2012-05-02 ]

Cocobod probes 70,000 tonnes discrepancy
Ghana's cocoa regulator Cocobod is investigating a
shortfall of around 70,000 tonnes of beans between
official cocoa purchases and its inventory after
buyers reported inflated volumes, a Cocobod
official told Reuters.

A fall in cocoa output in the world's second
largest producer, combined with tight credit
conditions, could have contributed to local buyers
overstating cocoa purchases in order to gain
advance funding - bruising Cocobod's reputation
for being a low risk loan recipient.

"It is true that we are dealing with an issue of
discrepancy of almost 70,000 tonnes," said a
Cocobod official with knowledge of the situation,
who asked not to be named.

"But some of us are not worried because the season
is still on and we'll be able to close the gap
before it ends."

The government of Ghana has a monopoly over the
export of cocoa beans. But domestic purchasing of
beans is carried out by licensed buying companies
(LBCs) who pay a fixed price to cocoa farmers,
before selling to Cocobod, who pays them
commission and transport costs on top of the
producer price.

Cocobod provides seed funding to the LBCs for
purchases at the beginning of the cocoa season,
based on a combination of the LBC's market share
in the previous season and the set price.

There is usually a lag between official purchases
and warehouse stocks as it takes time from when
cocoa is bought for it to be graded and sealed,
but traders said the difference is wider than
usual for this point in the season.

The Cocobod official was unable to give the
average discrepancies in the past.

As LBCs are also entitled to top-up funds midway
into the season from Cocobod, if they are able to
prove that they have exhausted the initial seed
fund, some could be misrepresenting their
purchases in order to get additional money.

Cocobod's purchasing data is based on information
provided by licensed buyers and the official said
that at least one of the licensed buyers has
admitted that they sometimes report targets
instead of actual purchases.

BUYERS MEETING INCONCLUSIVE

Cocobod held a meeting with licensed buyers in
early April in an effort to resolve the issue,
said the official.

"The meeting was inconclusive because Cocobod
needed to investigate further," said the
official.

"What is important now is to quickly conclude the
investigation to establish which buyers were
involved."

Traders said a sharp fall in Ghana's official
purchases in recent weeks could indicate Cocobod
is already addressing the issue.

"Maybe there was a discrepancy because some people
were over declaring the crop in which case the CMC
(Cocobod's Cocoa Marketing Company) proposes
slowing down the amount of cocoa purchases that
have been declared because they need to adjust the
purchased data compared to what was actually
delivered to them, into their warehouses," said a
European trader.

The latest figures showed that cocoa purchases
declared to Cocobod for the week ended April 5
were 1,777 tonnes - down from 2,108 tonnes the
week before and substantially lower than the 9,373
tonnes purchases in the comparable week last
year.

"I'd expect figures to stay low for another couple
of weeks for deliveries to catch up to purchasing
figures," said a second trader.

Cocobod's official purchases data hit 720,000
tonnes by April 5 since the season began in
October.

"If you consider that almost no cocoa has been
declared over the past 2/3 weeks, normally people
expect April purchases to amount to between
30,000-50,000 tonnes, if it continues this way it
might be only 10-15,000 tonnes," said the European
trader.

That will make it tough for Cocobod to hit an
870,000-tonnes target for the October-to-May main
crop.

If purchases remain at historically low levels
into the coming months it may also prompt some
trade houses to revise down their estimate for the
Ghana crop, said a trader.

Ghana produced a record over 1 million tonnes
during the 2010/11 season and was aiming to rival
that level this year.

Cocobod funds its cocoa purchases with an annual
syndicated loan facility which totalled $2 billion
and was oversubscribed by over 20 international
and local banks for the 2011/12 crop.

It's the largest soft commodity deal in sub
Saharan Africa and Cocobod financing has been seen
as one of Africa's most solid investments.

"If it is true that there has been misreporting of
up to 70,000 tonnes and it turns out the mid crop
is not good and the suppliers cannot make up the
difference, then it could damage the reputation of
this financing for Cocobod, because in the past it
has been one of the safe bets when it comes to
trade finance in Africa," said Edward George, head
of soft commodities research at Ecobank, which
participated in the 2011/12 syndicated loan.

"But ultimately if the shortfall is only 70,000
tonnes it won't affect the ability of Cocobod to
repay as this represents less than 10 percent of
expected production for the season."

Source - Reuters

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