Ivory Coast weighs cocoa tax cuts to lift farmer pay

Ivory Coast is considering cutting taxes on buying and exporting of cocoa to allow for an increase in the minimum price paid to farmers in the upcoming season, according to a person familiar with the matter.

The world’s biggest producer of cocoa is unlikely to raise the minimum price that it allows merchants to pay from the current 700 CFA francs ($1.27) per kilogram unless the tax cuts are implemented, said the person, who asked not to be identified because he isn’t authorized to speak about the matter. Tax breaks will allow buyers room to pay producers more, they said.

Industry regulator Le Conseil du Cafe-Cacao typically makes an official announcement on the minimum price at the beginning of a new harvest. The larger of the country’s two annual crops starts in October, which also marks the beginning of a new 12-month growing season. In April, the West African nation cut farm gate pay by 36 percent after international prices fell by more than a third in less than a year amid expectations of oversupply.

Mariam Dagnogo, a spokeswoman for CCC, didn’t answer calls and government spokesman Bruno Kone declined to comment when contacted by phone.

CCC forecasts a harvest of 1.725 million metric tons to 1.75 million tons for the next season, depending on weather conditions, said the person. With less than a month to go before the end of the current crop, cocoa arrivals since October have totaled about 1.96 million tons, based on calculations using government statistics and weekly data from a person familiar with the matter.

An increase in farmer compensation by Ivory Coast would narrow the pay difference with neighboring Ghana, the second-biggest producer. Ghana’s industry regulator has kept producer prices unchanged at the equivalent of 7,600 cedis ($1,717) per ton since last year and has ruled out a cut for the new season.

The contrast in pay is encouraging bean smuggling, with Ivory Coast fearing that it may lose as much as 400,000 tons of its next crop, a person familiar with the matter said last week.

Representatives of the two regulators met last week to discuss farmers’ pay and Ivorian officials requested that Ghana reduce its prices to curb smuggling, according to two people familiar with the matter.

The Ghanaian officials responded that a reduction is politically too sensitive while no data exists to back any claim of increased smuggling, said the people, who asked not to be identified because they’re not allowed to speak publicly about the matter.

Ghana offered to work with Ivory Coast to start a study into smuggling, while both countries will step up the patrolling of border regions, the people said.

Noah Amenyah, a spokesman for Ghana Cocoa Board, declined to comment when contacted by phone.

Ivory Coast will probably harvest 1.98 million tons in the current season, while Ghana’s crop will be 950,000 tons, according to forecasts by the International Cocoa Organization.