[ 2016-09-12 ]

Ivory Coast cracks down on cocoa contracts
Ivory Coast’s cocoa marketing board has given
exporters six days to supply documentation for
export contracts, including proof of a
counterparty, or they will be cancelled and
resold, the Coffee and Cocoa Council (CCC) wrote
in a memorandum seen on Friday.

The measure, aimed at stamping out speculation in
the top grower’s forward sales system, could
lead to the resale of 200,000 to 250,000 tonnes
worth of cocoa contracts, five exporters and a
finance ministry official told Reuters.

Exporters said the CCC had taken the step after
realising that small, domestic operators had
purchased contracts for the 2016/17 season, which
opens in October, at auction without securing a
price with off-takers.

World prices have since dropped and, having failed
to hedge, those exporters are now facing heavy
losses.

“The CCC is talking about cancelling local
exporters contracts because they have not been
hedged, and therefore remarketing them back to
international buyers,” one London-based trader
said, adding that the news had weighed on prices.

December London cocoa had tumbled 2.7 percent, to
2,202 pounds a tonne by 1230 GMT while December
New York cocoa was down 2.6 percent, at $2,810 a
tonne.

“Most of the contracts concerned by this were
bought from the CCC between November and December
2015 at prices of 2,100 to 2,150 CFA francs
($3.61-$3.69) per kg,” said one exporter.

“They didn’t finalise their contracts at the
time and now the market is at 1,800 CFA francs and
they can no longer execute these contracts.”

The CCC has sought to favour small, local
exporters by granting them certain fiscal
advantages and more flexibility under Ivory
Coast’s electronic auction system.

For example, international exporters are required
to provide the terms agreed with a counterparty
and a deposit equal to 2.5 percent a contract’s
value within one week of its purchase. But local
exporters pay no deposit and must only submit
their documentation before the start of the
season.

Larger exporters complained this level of leeway
for domestic operators opened the door to abuse.

“It hurts the whole system because there is a
lack of transparency,” said one international
trader.

The CCC memorandum stated that operators who see
their contracts cancelled and re-auctioned ahead
of the October start of the season will have to
pay a penalty of 15 CFA francs per kilogram if the
contracts are resold at a loss.

For contracts resold after the season’s opening,
an adjusted penalty will be applied. Exporters
will be banned from participating in the auctions
until they have cleared their penalties, the memo
said.

Source - CNBC Africa

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