IVORY COAST SAID TO SEEK COMPESATION FOR COCOA-EXPORT DEFAULTS.
Ivory Coast, the world’s largest cocoa producer, is asking for compensation for losses from exporters that defaulted on contracts this season.
Shippers that couldn’t fulfil their commercial agreements will have to reimburse industry regulator Le Conseil du Cafe-Cacao if defaults resulted in losses, according to a copy of a letter obtained by Bloomberg and sent by the CCC to a company in default in recent weeks. The companies will lose access to Ivory Coast cocoa auctions until the compensation is paid. It’s not clear how many letters were sent and which companies received them.
The CCC’s letter was reported earlier by Reuters. Marian Coulibaly Dagnogo, a spokeswoman for the regulator, didn’t return phone calls seeking comment.
Ivory Coast usually auctions about 80 percent of the bigger of two annual crops before the season starts in October. Some local companies have defaulted on their contracts after wrongly speculating that prices would rise. Cocoa futures tumbled more than 30 percent since reaching a six-year high in July, partly as traders forecast the global market would return to surplus.
Defaults mean the CCC is reselling contracts at lower prices and may have to tap a stabilisation fund stored in Ivorian bank accounts and designed to mitigate price risks. The recent sharp drop in prices could also force the regulator to use money kept at the Reserve Fund, stored with the Central Bank of West African States.
Ivory Coast has “sufficient resources” and hasn’t yet used either the stabilisation fund or the Reserve Fund to support cocoa sales after some exporters defaulted, Massandje Toure-Litse, the head of the CCC, said on state-owned television RTI last week. The Reserve Fund has less than 200 billion CFA francs ($328 million), government spokesman Bruno Kone said last week.
Cocoa futures plunged in the second half of the year on expectations that bigger crops in West Africa would shift the market into a surplus. At the same time, demand is showing signs of weakness. Global chocolate sales fell 2.3 percent in the three months through November, Barry Callebaut AG, the world’s largest cocoa processor, said Jan. 25, citing Nielsen data.
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