The Executive Director a.i. presents a review of outcome of September’s 84th regular session of the International Cocoa Council and the 144th meeting of the Executive Committee. (NB: Each of the highlighted presentations can be downloaded).

Among the distinguished delegates to our September meetings, we were pleased to welcome Their Excellencies the Ministers of Agriculture and of Trade of Côte d’Ivoire, Her Excellency the High Commissioner of Papua New Guinea and Their Excellencies the Ambassadors to the United Kingdom of Côte d’Ivoire and Costa Rica.

We also enjoyed presentations from the distinguished representatives of a number of our partner bodies, including the United Nations Development Program (UNDP), the International Finance Corporation (IFC) of the World Bank, the Dutch Sustainable Trade Initiative (IDH), the African, Caribbean and Pacific Group of States (ACP), the Common Fund for Commodities (CFC) and the European chocolate industry grouping CAOBISCO.

Since our last meeting in March, we were pleased to report to the Council that a number of countries had officially joined the International Cocoa Agreement 2010. The countries that we were delighted to welcome to the new Agreement were Costa Rica, Ghana, Indonesia, Togo and, most recently, Côte d’Ivoire. We were very pleased as well to note that when the new Agreement takes effect, representation by cocoa producing member countries of the ICCO would be over 95% of world production.

On the occasion of the tenth anniversary of the Harkin-Engel Protocol, which seeks to end the use of the worst forms of child labour in cocoa production, the Council discussed the Protocol and endorsed the work of the International Cocoa Initiative, which works closely with Member governments and is supported by industry and various NGOs.

During the Council meeting, I presented the results of our work at the Secretariat identifying the continuing threat of the Boom and Bust cycle of cocoa supply and demand and the dangerous outcomes that this could have both for producers and consumers. Despite the proliferation of projects and programmes aimed at relieving and shielding producers from the effects of this cycle, there has been little coordination of the various projects in order to focus efforts in the most efficient way to assist producers in an effective and long term manner. The Council therefore agreed to hold a World Cocoa Conference in Abidjan, Côte d’Ivoire in late 2012, to address these important issues, and to provide a “road map” for actions over the next five years aimed at developing a successful and sustainable cocoa economy.

The serious topic of the European Union’s proposed stringent limits on various contaminants in cocoa was also discussed in Council, and the Members expressed deep concern that a compound like cadmium—found in the sorts of volcanic soils that produce some of the world’s best cocoa—is the now being considered for much tighter regulation. The Members asked the Secretariat to make representations to the EU Directorate involved outlining the concerns involved and asking for clarity on the EU’s decision-making process in this case.

In Council, we made significant progress in discussing the Strategic Plan of work for the Organization for the first five years of the new International Cocoa Agreement, and we were able to get approval for a large and ambitious schedule of projects and activities beginning in the upcoming year.

On the subject of project activities, we were able to report to our Executive Committee several projects that are now under way, including SPS Capacity Building in Africa, which was successfully launched at a Workshop in Yaoundé, Cameroon in June.  The project, along with a proposed parallel project to take place in Latin America and Asia, aims to maintain market access for cocoa beans by ensuring the production of good quality cocoa that complies with the relevant international regulations and legislation on pesticide residues and other harmful substances. Some 90 cocoa stakeholders from the five African member countries taking part attended the Yaoundé Workshop, which was addressed by a number of international experts in the field.

We were also able to report to the Council on our very successful Seminar on Cocoa Terminal Markets, which was held in June at the ICCO headquarters in London. About 40 participants—mainly policy makers and their advisors from our member countries all over the world—benefited from the seminar, which looked in depth at futures contracts and the way they are used in the cocoa market. The reactions to this event were so positive that the Secretariat is considering repeating the Seminar in the near future. As part of our capacity building initiatives, the Executive Committee agreed to recommend to Council that more Seminars of this type, on this and other appropriate topics, be conducted in exporting member countries under the auspices of the ICCO Secretariat.

Among the topics on the agenda for discussion, the Council considered the proposed relocation of the Organization’s headquarters to Abidjan, Côte d’Ivoire. His Excellency, the Minister of Trade of Côte d’Ivoire, Mr Dagobert Banzio, reconfirmed his government’s invitation to the Organization, and the offer to host the ICCO in Abidjan for a period of ten years so that the Organization could build its headquarters there. The Council agreed to allow delegates time to consult with their governments about it, and to report back at the next meeting of the Council in March 2012.

The council also launched the search for a new Executive Director to take over the running of the Organization’s Secretariat after the 2010 International Cocoa Agreement comes into force, probably by September 2012. The new Executive Director will come from one of the ICCO member countries, be endorsed by that country and be chosen by a selection panel made up of an equal number of producer and consumer member representatives, the Council decided.

The Council and Executive Committee elected new officers, and named Mr Rafael Jaén Tapiola (Spain) as the 2011/12 Chair of the Council, with Mr David Braun (Switzerland) as First Vice Chair, and a representative of Malaysia as Second Vice Chair. Madame Massandjé Toure-Litsé (Côte d’Ivoire) is the new Chair of the Executive Committee, and Sr Idelfonso Medina Garcia (Dominican Republic) is Vice Chair.

Finally, as a group we must heartily thank the Deputy High Commissioner of Ghana for her country’s very gracious hospitality during our meetings.

Our next meetings are scheduled for March 2012 in Guayaquil, Ecuador, following the kind offer of the government of Ecuador to host the meetings there.

Indonesia on 12 September, 2011 signed the International Cocoa Agreement 2010, the United Nations Treaty Section has confirmed.

Click here to see the official notification of signature to the Agreement from the United Nations.

Togo on 19 September 2011 signed the International Cocoa Agreement 2010, the United Nations Treaty Section has confirmed.

icon Click here to see the official notification of signature to the Agreement from the United Nations.

Côte d’Ivoire on 20 September 2011 signed the International Cocoa Agreement 2010, the United Nations Treaty Section has confirmed.

icon Click here to see the official notification of signature to the Agreement from the United Nations.

International Cocoa Council and subsidiary bodies, including the Consultative Board on the World Cocoa Economy

The International Cocoa Council and subsidiary bodies, including the Consultative Board on the World Cocoa Economy, will meet in London 20 – 23 September 2011.

Provisional Timetable of Meetings, 20-23 September 2011, London

ED(MEM) 925
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International Cocoa Council: Draft Agenda

ICC-84-1
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Executive Committee: Draft Agenda

EX-144-1
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Consultative Board on the World Cocoa Economy: Draft Agenda

CB-24-1
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Ghana on 19 August, 2011 signed the International Cocoa Agreement 2010, the United Nations Treaty Section has confirmed.

Ghana - official notification of signature to the Agreement from the United Nations

26 August 2011–The International Cocoa Organization today releases its revised forecasts for the current 2010/2011 cocoa year and revised estimates for 2009/2010 of world production, grindings and stocks of cocoa beans, summarized below.

The data published in Issue No. 3 – Volume XXXVII – Cocoa year 2010/2011 of the Quarterly Bulletin of Cocoa Statistics, reflect the most recent information available to the Secretariat as at the end of July 2011.

Cocoa year (Oct-Sep) 2006/2007 2007/08 Year-on-year change
 Previous estimates a/  Revised estimates  Forecasts
(thousand tonnes)  (Per cent)
World production 3 632 4 025  4 195 + 563 + 15.5%
World grindings  3 698 3 798 3 828 + 130 + 3.5%
Surplus/deficit b/  – 102 + 187 + 325
End-of-season stocks 1 606 1 816 1 931 + 325 + 20.2%
Stocks/Grindings ratio  43.4% 47.8% 50.4%

Notes:
a/   Forecasts published in Quarterly Bulletin of Cocoa Statistics, Vol. XXXVII – No. 2 – Cocoa year 2010/2011
b/   Surplus/deficit: net world crop (gross crop adjusted for loss in weight) minus grindings
Totals and differences may differ due to rounding.

This issue of the Bulletin contains the Secretariat’s revised forecasts for the 2010/2011 cocoa year as well as data for the past four years of production and grindings of cocoa beans, detailed by country.  The main features of the global cocoa market are illustrated in colour charts.  In addition, the Bulletin includes comments on crop and demand prospects in the leading countries for the current season, and a review of price developments on international markets for cocoa beans during the April-June quarter of 2011.

Statistical information on trade in cocoa beans, cocoa products and chocolate, by country and by region, published in this edition, covers annual data from 2007/2008 to 2009/2010 and quarterly statistics for the period April-June 2009 to October-December 2010.  Details of origin of imports and destination of exports for leading cocoa importing countries are also provided.  Historical statistics on cocoa trade and consumption, by country and by region, for the period 2001/2002 to 2009/2010 are presented for reference.

Copies of the Quarterly Bulletin of Cocoa Statistics, including Microsoft Excel files and Adobe PDF format can be ordered from the ICCO Secretariat at the address below:

International Cocoa Organization
Commonwealth House
1-19 New Oxford Street
London WC1A 1NU
Tel:+44 (0)20 7400 5050
Fax:+44 (0)20 7421 5500
E-mail: statistics@icco.org or assoc.statistics@icco.org

Costa Rica on 6 July, 2011 signed the International Cocoa Agreement 2010, the United Nations Treaty Section has confirmed.

Click here to see the official notification of signature to the Agreement from the United Nations.

A range of uncoordinated projects aimed at stimulating output in producing countries could exacerbate the damaging “boom and bust” cycle in the world’s cocoa economy, according to an International Cocoa Organization presentation on 7 July.

Speaking at the Fifth Indonesian International Cocoa Conference in Bali, Executive Director a.i. Dr. Jean-Marc Anga said that the ICCO was alarmed that major production programmes backed by both the chocolate industry and producing country governments could make the cocoa market even more volatile and lead to a collapse in prices if unchecked.

The ICCO has identified over 60 ongoing projects worldwide aimed primarily at improving production levels, in response to a general industry concern that demand is outstripping supply and that cocoa supply is moving into a period of structural deficit.  Cocoa prices have almost doubled in the past five years, from about US$1,540 in 2005 to US$3,135 in 2010.  In response to this, the cocoa and chocolate industry and most of the major cocoa producing nations have planned significant increases in their production.

Regarding the projects, “There are a few common denominators that we, in ICCO, find deeply troubling, Dr. Anga said. “They are all aiming predominantly at increasing cocoa production, they are uncoordinated and nobody seems to worry about their impact on cocoa prices in a few years.”

As a result of these uncoordinated projects and of the producing countries’ production policies, he added, world production (now at about 4 million tonnes) could reach 5 or even 6 million tonnes, flooding the market and causing another price collapse.

Dr. Anga pointed to the damaging periods of boom and bust in the past as an example: in July 1977 cocoa prices reached a record high of $4,722 per tonne in nominal terms (or close to $15,000 in real terms), while in November 2000, the market slumped to just $774 per tonne (or $960 in real terms).

He added that because the price of cocoa represents only 10% of the cost of a chocolate bar, the ICCO believes that even if market prices were to double from their current level of about $3,000 per tonne, there would be a limited impact on final consumption, while producers stood to make significant gains that would help improve their living standards.

“Our problem in the next few years is not the threat to cocoa supply per se,” Dr. Anga said. “Our biggest problem is the lack of coordination, which feeds price volatility and the uncertainty that it creates, leading to peaks followed by collapses in cocoa prices. This is what we must avoid at all costs.”

Dr. Anga proposed a coordinated strategy between the producing countries and the chocolate industry, for the raft of projects in cocoa producing countries.  He concluded by advocating an ICCO-led global cocoa summit in mid-June 2012 on the future of the world cocoa economy, to be attended by governments from cocoa producing and cocoa consuming countries, the cocoa and chocolate industry, donors, international development and aid agencies, the civil society and other stakeholders.  The summit would agree on a global cocoa roadmap and pledge the resources to implement it.

The ICCO’s Seminar on Cocoa Terminal Markets in mid-June brought representatives of a number of ICCO member governments up to date with the latest developments on the commodity futures markets.

The Seminar, which took place at the ICCO’s London headquarters from 13 to 16 June, briefed policy makers and their advisors on the important role that the terminal markets play in the world cocoa economy, by shifting price risk through hedging, by providing information for storage decisions and by acting as centres for the collection and dissemination of price information.

The Seminar took place against the background of events in July 2010, when London’s NYSE Liffe cocoa futures market was the subject of much press interest, due to a large position taken by a single market player. The incident raised concerns about the transparency, integrity and efficiency of terminal markets, and led to calls for stronger regulation of that market by the European and UK financial authorities.

In order to assist delegates to understand these market developments, the Seminar reviewed the various types of contractual arrangements used to trade cocoa, looking in-depth at futures contracts and their trading, before examining the competitive structure of the markets themselves, the role of brokers and other professionals in the markets.

ICCO Executive Director a.i., Dr Jean-Marc Anga, welcomed about 40 participants to the Seminar, which was conducted by the ICCO’s Econometrician Dr Michele Nardella and Economics and Statistics Director a.i. Laurent Pipitone. It also included presentations by speakers from both of the world’s major cocoa exchanges–Ian Dudden, Director of Commodity Derivatives at NYSE Liffe, as well as Thomas Farley, President and Chief Operating Officer of New York’s ICE Futures US—each of whom provided an insight into the functioning of their respective futures markets.

The Seminar also addressed the way fundamental factors affect futures prices, and taught delegates the importance of basis prices, spreads between different delivery months, and their connections with expected spot prices and storage costs, in order to illuminate the way the futures markets work.

The practicalities of using the futures markets, and of employing various hedging strategies to mitigate the impact of any decline in cocoa prices, comprised another section of the Seminar. Also included were a series of practical case studies, suggesting strategies for grower co-operatives, exporters and traders.

The Seminar concluded with a guided visit for the participants to the NYSE Liffe cocoa grading room in London, where they were hosted by Robin Dand, Lee Watson and Barry Readings of the Exchange.

Each participant was presented with a certificate at the conclusion of the four-day Seminar, and the positive reactions to the presentations were such that the Secretariat is seriously considering repeating the Seminar in the near future.