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Expert Says Cocoa Price Slump Unrelated to Global Financial Crisis

The recent fall in the price of cocoa from Cameroon has some farmers and exporters alarmed. Officials say the drop is not linked to the global economic recession. But they warn that a prolonged downturn could lead to a drop in demand for exports from the continent. Voice of America English to Africa Service’s Ntaryike Divine, Jr., in Douala, Cameroon, reports the Cameroon Cocoa and Coffee Board says recent drops in cocoa prices are not linked to the current global financial crisis.

The managing director of the board, Michael Ndoping, says the price slump is due to a glut of cocoa on the international market. He says the board won’t know until early next year if the current price plunge means the worldwide recession is reducing demand for African cash crop exports. He adds that recent cocoa prices have been dropping compared to the week before.

“This is due to the fact that this is the peak period when all producing countries are all exporting – so there’s surplus supply as opposed to demand. So it obviously amounts to a drop in prices. But prices normally pick up in January or February; so it’s in January and February that we will know if the drop in prices is being caused by surplus supply on the market or is an effect of the world banking crisis.

But he notes that with the stocks and shares markets being highly speculative, anything could happen.

Ndoping spoke against a backdrop of fear gripping cocoa farmers and dealers in Cameroon. Many think the credit crunch is finally affecting the price of their exports. Cameroon's cocoa and coffee are traded on the London and New York stock exchanges.

Production has considerably increased over the past few years. But for several weeks, there has been concern over the possibility that the financial crisis will cut demand. He says, “If the banking crisis affects the commodities market, then somewhere we might witness a drop in prices. So we could unfortunately be affected, although right now we cannot say.”

A long economic crisis beginning in the mid-80s wrecked several sectors of Cameroon’s economy, especially agricultural exports like cocoa. Many farmers abandoned their plantations as demand for their crops sank. The government-run national produce marketing board, which provided financing for farmers, collapsed.

A new entity, the Cameroon Cocoa and Coffee Board was created in 1991 to stimulate production, regulate marketing and monitor the quality of cocoa and coffee produced for export. Ndoping says thanks to several government and donor-backed measures, the country has witnessed steady growth in cocoa exports, especially with increased investment and improved farming practices.

Over the past 30 years, Cameroonian production has risen from over 123 thousand tons a year to more than 187 thousand tons, and there are prospects of further expansion. The increased production has made Cameroon the world’s fifth largest cocoa producer.

But he says he regrets that the coffee sector has not made similar progress. Farmers, especially those in the major coffee-producing northwest, stopped production during the economic crisis of the eighties and nineties. Many switched to food crops. Some say they could not compete in the world market against better-quality coffee from South America, and West Africa.

But current attractive world market prices are reviving interest in coffee growing and many farmers are going back to resurrect their farms. Ndoping sees a bright future for Cameroon, currently ranked 19th worldwide in coffee production. The government is helping farmers try to double production by 2010. Arabica coffee currently stands at 3,890 tons up from 3,100 tons in 2006. Production for robusta coffee has changed little, at about 40,000 tons.

Government support includes exemptions from import duties on imported inputs like improved seeds, and pesticides and their sprayers. It has also put in place a financing program to help farmers reclaim abandoned plantations. And, it’s building storage facilities in growing zones to cut down on transportation costs by organizing workshops on improved farming practices, helping organize farmers’ cooperatives, and facilitating farmers’ access to markets.

Government officials say only better quality produce, and the elimination of middlemen who do not respect world market standards, will increase demand for Cameroonian coffee.