FACAN sees Africa Cocoa Exchange as key to fair cocoa pricing

Onome Amuge

The Federation of Agriculture Association of Nigeria (FACAN) has said that cocoa producers and exporters in Africa are in support of the establishment of the Africa Cocoa Exchange (AfCX). The AfCX is seen as a potential game-changer in the way that cocoa is traded in Africa, giving farmers and producers more control over prices and terms of trade.

 Victor Iyama,the FACAN president, argued that the exchange will  bring positive impact to achieving a sustainable world cocoa economy.

Iyama expressed frustration that while the global price of cocoa is at a record high  between $4,458 and $4,522 per tonne in London and in New York, local cocoa farmers are not seeing any benefit. He argued that this is because the price of cocoa beans has not been passed on to the farmers, and they are being paid less than the global market price.

According to Iyama, cocoa farmers in Africa receive a fixed price from the agents of chocolate manufacturers during the cocoa season. He said that the price paid to farmers is only about six per cent of the price that consumers in rich countries pay for chocolate. 

Iyama highlighted the fact that while the global price of cocoa is increasing, the profits of multinational chocolate companies are also increasing. However, he pointed out that the cocoa farmers who produce the beans are not benefiting from this trend. He said that the chocolate companies are making high profits, while the farmers who are the foundation of the cocoa industry are struggling to make ends meet. He argued that this situation is not fair, and that it needs to be changed in order to ensure the long-term sustainability of the cocoa industry.

The International Cocoa Organisation (ICCO) recently commissioned a study to explore the possibility of creating an Africa Cocoa Exchange. The study examined whether an exchange would be technically feasible and financially viable, and concluded that it would be. The study also found that an exchange would be beneficial for the African cocoa industry. It noted that an exchange would help to reduce price volatility, promote transparency, and improve market efficiency. 

The feasibility study was split into two phases. The first phase was to identify the key stakeholders and engage with them to understand their needs and expectations. The second phase was to systematically analyse the findings from phase one and develop a potential exchange model that would best suit the needs of the African cocoa industry.

The first phase of the study analysed the cocoa value chain and sectoral regulations in four countries: Côte d’Ivoire, Ghana, Nigeria, and Cameroon. The analysis was used to identify key issues and challenges that need to be addressed by an exchange. The study also examined the experience of existing exchanges in Africa, and used the information to identify possible models for the design of an Africa Cocoa Exchange. The study then engaged stakeholders, including government officials, industry associations, and farmers, to get their input on the design options for the exchange.

Phase II of the study, will cover defining the interfaces between spot, derivatives, and financing components of the AfCX, specifying the functional and infrastructural scope, resources, workflows, and frameworks of the AfCX, articulating the role of AfCX with respect to the wider environment (sectoral regulations, institutional regulations, physical markets, and terminal markets) and Pilot testing of the AfCX to demonstrate proof of concept.