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Cocoa prices rise due to Ivory Coast, Ghana pricing agreement

August 2, 2019 12:15 PM

A Mondelez International Inc (MDLZ.O) executive has said that the new cocoa pricing mechanism announced by the top two growers Ivory Coast and Ghana is causing cocoa costs to rise.

Cocoa

The chief financial officer of the Illinois-headquartered maker of Oreo cookies, Luca Zaramella told Reuters that “It is fair to say that given some of the proposals that are coming out of Cote D’Ivoire and Ghana, there is a spike in cocoa cost.”

This is coming after the two West African countries announced a “living income differential” of $400 per tonne of cocoa for the 2020/2021 season to help fight widespread farmer poverty. This replaced an earlier proposal for an outright floor price of $2,600 per tonne.

Both New York CCc1 and London cocoa LCCc2 futures hit roughly one-year highs around the time of the pricing announcement, but have since slipped. Many market participants remain uncertain as to how exactly the new mechanism will be implemented.

Zaramella said that “Concepts like the living income differential are putting a little bit of pressure in the market. And the cost of cocoa has gone up.”

Meanwhile, he declined to comment on any company plans to adjust the future pricing of its goods in Europe.