Ivory Coast's Coffee and Cocoa Council (CCC) has sold forward up to 170,000 tonnes more main crop export contracts than it's now expected to produce, two senior officials with the marketing board told Reuters on Thursday. The miscalculation will leave some exporters unable to fulfil their contractual obligations to counterparties, and the CCC is expected to begin talks with them on Thursday to discuss possible solutions.
The CCC typically sells forward 70 to 80 percent of Ivory Coast's anticipated harvest in order to fix a minimum guaranteed farmers' price. Exporters purchase the remainder in spot sales. The officials, who asked not to be named, said the CCC auctioned over 1.53 million tonnes worth of export permits for the October-to-March harvest. But it now forecasts output of 1.36 million to 1.38 million tonnes, a decline caused by poor weather and rampant smuggling.
"The goal of today's meeting is to identify the problems that affect the current marketing and find solutions, but we know that certain (exporters) seem to be inflexible about respecting contracts," said one of the CCC officials.
London cocoa futures rose to a three-month high on Thursday, buoyed by a weak British currency and diminished crop prospects in Ivory Coast, the world's largest cocoa grower. Though exporters bid on export permits rather than physical cocoa under Ivory Coast's marketing system, the CCC is supposed to prudently manage sales in a way that ensures production meets export demands.
"We are facing a novel situation where the council is in default vis-a-vis certain exporters who hold contracts but don't have beans," the director of one export company told Reuters. Exporters said they expected the CCC to propose allowing exporters to roll over their contracts into next season. It could also simply cancel the contracts and pay the exporters a penalty, they said.
But rising prices in London and New York since late January have left some exporters under pressure. "It's up to the council to make proposals, but some of our clients in Europe want their cocoa now that the price is high, which complicates matters," a second exporter said.
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