ABIDJAN (Reuters) - Ivory Coast is close to agreeing an increase in the minimum price paid to cocoa farmers to 750 CFA francs ($1.40) per kilogram for the 2017/18 season, while holding the export tax at 16 percent, sources familiar with the matter said.
The world’s top producer sells forward the bulk of its anticipated harvest to be able to set a minimum price for farmers, known as the farmgate price, at the start of the season on Oct. 1.
Last season opened with a price of 1,100 CFA francs/kg, but that dropped to 700 CFA francs/kg in March amid a sharp drop in world prices. Export taxes were reduced in April from 22 percent to 16 percent to soften the impact of the drop on exporters.
Two directors of major export companies involved in discussions with the government said they would agree to lift the price slightly if taxes remained at the reduced rate. Two officials of the Coffee and Cocoa Council (CCC), speaking on condition of anonymity, confirmed that was their intention.
“The discussions went well between us and them because the situation is quite simple. If the taxes are at the level of 22 percent the guaranteed price cannot exceed 700 CFA francs/kg. But if they keep the taxes at 16 percent we can pay 750 CFA francs/kg,” said the director of one export company in Abidjan.
Another exporter said: “The Ivorian side has clearly understood the stakes and taxes should remain unchanged at 16 percent. In any case, that’s the feeling they gave us during discussions and after.”
The stakes are high for the government because neighboring Ghana has already said it will maintain a higher price of 1,000 CFA francs/kg for the upcoming season, which incentivises Ivorian farmers to smuggle their beans across the border.
Smuggling is already common, but increases the wider the price gap.
“The principle is established to keep taxes at 16 percent to allow us to fix a guaranteed price around 750 CFA francs/kg. This should make it possible for us to combat smuggling, although we do not have too many illusions,” said a CCC official.
Writing by Nellie Peyton; Editing by Edward McAllister and Mark Potter