Why Are People Smuggling Cocoa Beans out of Ivory Coast?

Bloomberg

3 hours ago

00:00
Prices for cocoa on the global market have nearly tripled since 2023, as bad weather and disease outbreaks exacerbate supply issues. But farmers in Ivory Coast have found it hard to cash in as the government run regulator sets the price at about a third of the global level, fuelling smuggling of the crop to neighbouring countries. For more, Bloomberg's Ondiro Oganga joins us now from Kigali, Rwanda. Talk to us about the incentive to smuggle cocoa and how smugglers actually get it out of the Ivory Coast, looking obviously, to take advantage of these higher cocoa prices now. Smuggling is a dangerous but highly lucrative business. Now, when you're caught, you face up to ten years in prison or pay a fine of up to $86,000. But on the flipside, if you're not caught, you can make up to $240 a week in comparison to $80, which is a monthly living wage of the country. So that is incentive enough. You also look at the prices of cocoa in the international market, the nearly triple the peak to 13,000. Now those settled at 9000. And in the intro you mentioned that there are a couple of other victims that are fueling shortage, bad weather, diseases and investment in the industry. And all these are factors that are just leading to price gains in the international market. And as a result, we are seeing prices soar. But farmers are not feeling the gains because most of their beans are bought by government run institutions. And this is because the government is trying to insulate farmers from volatility in the international market. Now, when the prices are low, the farmers enjoy the cushion, but when the prices are high, they can't help but feel shortchanged, particularly when countries like Togo, Liberia and Guinea are offering to pay nearly twice what the government is paying in Cote d'Ivoire to buy just a ton or a bag of the beans. And so we are seeing smuggling on the rise, motorbikes and trucks taking alternative routes in the night, trying to smuggle cocoa out of Ivory Coast into neighboring countries like Guinea. And as a result, despite Guinea not making enough investment to boost domestic cocoa production, the shipments have grown by 15%. And while they are reaping the benefits, the pain is being felt across the border. How is the smuggling actually impacting the economy in both an Ivory Coast, but also just broadly more broadly in the region as well? What sort of an impact is it having? It's unfolding quite fast. In 2023, 2024, shipments of cocoa at the port dropped by over 30%. And while there are other factors contributing to this, the government says over 100,000 tonnes were smuggled out of the country in comparison to 1.7 million tonnes that they produced in that season. And because cocoa account for up to 40% of total export revenue for the government, this could leave a big dent in their national budget and also the development problems in the country. Other people were also feeling the pain at international buyers. Sourcing has become more difficult because one the shortage until you cannot trace the business, particularly now that EU regulations are going to come into effect on the 30th of December. If you cannot trace the beans, then you are unable to rule out deforestation and child labour from the value chain. And that means that it will be harder for this beans to be absorbed in the international market. Exporters and traders are also feeling the pinch because when there's a shortage, then they are torn between either breaking the law or paying exorbitant prices at farm gate to be able to get their hands on these coffee beans and that new cocoa beans, rather. And that means that these prices are being passed down to the consumers. A cup of chocolate is higher and also above chocolate prices are going higher and higher.