UPDATE 1-I.Coast cocoa merchants accept offer, back off boycott
* Merchants had threatened to stop work, smuggle beans
* Risks of later blockages remain
By Ange Aboa
ABIDJAN, Sept 26 (Reuters) - Ivory Coast cocoa merchants backed away from threats to boycott the start of the forthcoming harvest season after the country's marketing board increased allowances for the costs of collection and transportion that has been at the heart of a dispute.
The world's top grower will begin harvesting the 2012/13 crop on Oct. 2 under a government-led scheme that uses the proceeds from forward-selling of the crop to guarantee prices for farmers and encourage them to reinvest in their plantations.
The Coffee and Cocoa Council (CCC) unveiled a scale of reimbursable costs for exporters late on Tuesday, raising the allowances for the costs of collection from farms and transportion to ports from 70 to 80 CFA francs ($0.16) per kg. It has yet to announce the farmgate price.
"With 80 francs we can start the season. We are not going to block the season over that," Joseph Attoungbre, president of GTC, an organisation representing around half of Ivory Coast's registered merchants, told Reuters on Wednesday.
Middle men, who collect and deliver to ports most of Ivory Coast's cocoa, had threatened to stop working at the start of the season or illegally smuggle beans if the CCC refused to increase the allowance.
They said the allowance failed to take into account weight lost during the transportation of beans and the bribes and illegal taxes merchants must pay to soldiers, police and customs agents en route to port. They had been demanding an allowance of 94.2 CFA francs/kg.
MERCHANTS INLAND COULD STILL FACE LOSSES
While Attoungbre said the proposed allowance likely reflected costs for growing regions with easy access to ports, merchants further inland could still be saddled with losses under the system and the risk of later blockages remained.
"We'll see how that works, but we aren't going to take any risks if it turns out that our costs are higher than the allowance," Attoungbre said.
Exporters had also called for the allowance to be increased, saying that a failure to do so would push merchants to ignore the government-imposed farmgate price, torpedoing the reform's primary aim and putting supplies at risk.
"We are satisfied with the scale as far as we are concerned. We are in perfect agreement with the Council's propositions," said the director of an Abidjan-based export firm.
The cost allowance scale, which was distributed to exporters and seen by Reuters on Wednesday, confirmed a decision taken during a board meeting on Friday that also decided to abolish a 20-year-old tax break given to local cocoa grinders.
Exporters Cargill, Barry Callebaut, CEMOI and ADM all currently benefit from a reduced DUS ("droit unique de sortie") tax - the main cocoa export tax - under a subsidy introduced during the 1991/1992 cocoa season.
Rival exporters say the subsidy gives the grinders an unfair advantage and cost Ivory Coast 34 billion CFA francs ($67 million) in 2010.
"It's a shame the Ivorian government doesn't realise all that we've invested in this country," the Ivory Coast director of one of the grinder companies told Reuters. "We modernised and increased the capacity of our factories, and if this country is now the world's top grinder, it's thanks to us," he said.
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