ABIDJAN: Ivory Coast has reduced a quality premium that cocoa exporters pay for the mid-crop harvest by 320 pounds ($443) per tonne to turn it into a discount, in an effort to revive weak sales during the COVID-19 pandemic, according to eight sources.
The premium of 70 pounds per tonne has been cut to -250 pounds, or a discount of 250 pounds, by the Coffee and Cocoa Council (CCC), the two CCC sources and six industry sources told Reuters.
The "country-differential" premium - so called because exporters pay it because of the high quality of cocoa from Ivory Coast, the world's top producer - is quoted in British pounds because supplies are primarily traded on a London exchange.
The reduction last month mostly cancels out a separate, $400 premium that exporters have to pay for export contracts. The move has helped lead to sharp increase in sale of mid-crop export contracts, from a total of 180,000 tonnes in early January to 460,000 tonnes last week, the sources said.
A spokeswoman for the CCC, the industry regulator, did not immediately respond to a request for comment.
The CCC is aiming to sell a total of 555,000 tonnes worth of contracts for the April-to-September mid-crop by the end of this month.
The weak Ivorian contract sales have been caused by falling global demand for chocolate due to the pandemic and higher costs linked to the introduction of the living income differential (LID) premium this season.
The $400 per tonne LID is intended to increase farmer wages, but exporters say it has made Ivorian cocoa too expensive compared with other origin countries.
"The CCC understood that with a country differential at 70 pounds and an LID at $400, it was impossible to have buyers," the head of a European export company said.
Neighbouring Ghana, the world's second-biggest cocoa producer, also implemented the LID this season. The two countries together produce two-thirds of the world's cocoa.
The country differential for the ongoing main crop harvest was also reduced last month, by 70 pounds to -200 pounds per tonne, the sources said. That reduction helped main export crop contract sales rise from 1.45 million tonnes at the end of December to 1.6 million tonnes last week, they said.