Talks on a new international cocoa agreement resume in Geneva on Monday amidst a mounting production deficit and resulting steep rises in the price of cocoa beans.
The resumed session of the United Nations Cocoa Conference, 2000 (26 February - 2 March) follows negotiations last November which left several issues pending. Still unresolved was a formulation on the "sustainable cocoa economy" that would balance the interests of both exporters and importers and articles on the use of cocoa substitutes and the promotion of cocoa consumption. The 1993 agreement, whose objective was to help stabilize the world cocoa market, is being renegotiated by representatives of most of the world´s leading cocoa-exporting and -importing countries.
World cocoa production is projected to decline almost 8% in the 2000/2001 cocoa year, leading to a production deficit of 205,000 tons, compared with a 1999/2000 production surplus of 91,000 tons, according to the International Cocoa Organization (ICCO). The production decline in West Africa, the world´s top cocoa-producing region, is due mainly to bad weather, particularly when compared to the exceptionally favourable growing conditions of the previous year. In other regions, the decline was caused by pests and diseases.
The cocoa market has been nervous since prices jumped suddenly from an average daily 620.77 special drawing rights (SDRs) per ton last December to 742.57 SDRs in January, reaching 952.41 SDRs on 21 February. This rise bucks previous downward trends prevailing since May 1998 and is directly related to the expected production deficit in the current season.
In Côte d´Ivoire -- the #1 producer/exporter and #3 processor of cocoa beans worldwide -- crop estimates are down, but grindings are up. Côte d´Ivoire and other cocoa-producing countries have recently stepped up their processing capacity, which is expected to increase the volumes of cocoa grindings at origin to just over 32% of total world grindings in 2000/2001. All cocoa producers are developing countries, and increased grinding at origin means that more of the revenue from cocoa remains in the home country.
As to worldwide cocoa consumption, it is expected to grow over 2% this cocoa year and is rising in the non-traditional markets of Eastern Europe and the Far East, especially in the form of cocoa powder.
At the previous session of the Conference, negotiators agreed on market monitoring mechanisms and the institutionalization of private sector participation in the London-based ICCO, which administers the agreement. That participation will take the form of a consultative board of experts from across the cocoa sector, including trade and industry associations, national and regional cocoa producer and exporter organizations, and cocoa research institutes. The Board will serve the ICCO Council in an advisory capacity, identifying threats to supply and demand, proposing action to meet the challenges and facilitating the exchange of information on production, consumption and stocks of cocoa worldwide.
The cocoa market will be monitored by a newly established Market Committee, which will identify market imbalances and obstacles to consumption. It will also examine annual production and consumption forecasts, on the basis of which exporting members may undertake to coordinate their national production policies. (For background, see press releases TAD/INF/2870, 2871 and Corr., 2872 and 2874.)
The 1993 agreement, which expires 30 September 2001, has 39 members, together accounting for 82% of world production and 70% of world grindings of cocoa beans. ICCO is forecasting that, for the 2000/2001 cocoa year, the world´s top producers will be Côte d´Ivoire (41% of world production), followed by Indonesia (15%), Ghana (14%), Nigeria (6%) and Brazil (4%). The top grinding countries are projected to be Netherlands (15%), United States (15%), Côte d´Ivoire (9%), Germany (7%) and Brazil (7%).
The Conference Bureau comprises Ransford A. Smith (Jamaica), President; Francois-Xavier Ngoubeyou (Cameroun) and Tommy Johansson (Sweden), Vice-Presidents; and Adriaan Frijlink (Netherlands), Chairman of the Negotiating Committee.
The Cocoa Conference has been held under the auspices of UNCTAD, which over the years has been involved in the negotiation of numerous international commodity agreements. The next commodity arrangement to come up for negotiation under UNCTAD auspices will be the proposed establishment of an international jute study group, to replace the International Jute Organization that is now under liquidation. Those negotiations will take place at a conference in Geneva on 12-13 March.
