SWV P72 This paper is prepared for staff use and is not for publication. The views expressed are those of the author and not necessarily those of the Bank. INTERNATICNAL BANK FOR RECONSTRUCTION AND DEVELPMENT Economics Department Working Paper No. 72 WORLD COCOA SITUATICN March 26, 1970 Trade Policies and Export Projections Division Prepared by: Flora White Adnan M. Muhtasib (research assistant) TABLE OF CONTENTS Page No. I. Introduction. .......... ..... .... ..........a....a........... * ....a... ..... 1 II. Past Trends.. ..... . ... ........00 1 111o Future Prospects ................... ..................... o*.......5..*0 5 3 II.FuueProdectso ....... 3 Stock s . . . . . a & a . o oo a * .0, . 8 Grindings and Pree.... .............................. 8 IV. International Negotiations .0O..... ... 0-.640.0... 0.... ....................... 10 TABLES 1 World Production of Cocoa Beans, by Main Producers 5-Year Averages 1934/35-1938/39 to 1964/65-1968/69 2 World Exports of Cocoa Beans, by Volume, 1947-51, 1952-56, 1966 to 1968 3 Relative Value of Cocoa Bean Exports to Total Exports, 1966 to 1968 4 World Cocoa Situation, 1946 to 1969 5 Cocoa Price, Yearly Average, New York Spot Accra (Fully Fermented), 1913 to 1969 6 Cocoa Price: New York Spot Accra, by Months for Selected Years 7 Cocoa - World Production Projected to 1974/75 8 Data for Price Forecast, 1971 to 1975 WORLD COCQA SITUATICN I. INTRODUCTICN 1. The purpose of this paper is to re-assess the world cocoa situ- ation in light of the additional information which has become available since the spring of 1969. It may be noted that cocoa is a particularly volatile commodity and requires frequent review because of the importance of the current production estimate and its effect on price. 2. Cocoa is also a commodity which has relatively few producers and exporters. More than three-quarters of world output and exports is concentrated in five countries (Ghana, Nigeria, Brazil, Ivory Coast and Cameroon) as shown in Tables 1 and 2. When Ecuador, Equatorial Guinea, Dominican Republic, Papua and New Guinea and Togo are added about 90% of each of the world totals is accounted for. The importance of cocoa in the ten countries' foreign exchange earnings varies from 66% for Ghana to only 2.5% for Brazil as shown in Table 3. II. PAST TRENDS 3. Since World War II (1945/46 to 1968/69) world production of cocoa has increased at an average of 3.7% yearly. Within this time span there have been three distinct periods. For the first 13 years (1945/46 to 1958/59) the growth in production was 2.2% yearly while in the following five years (1959/60 to 1964/65) there was an acceleration to 6.2% yearly. This was followed by a sharp deceleration in the yearly growth rate to 0.7% (1965/66 to 1968/69) in the last three years. Table 1 shows world production, by leading producers, for selected 5-year average periods over the past 30 years and Table 7 shows production in the most recent period by individual years from 1963/64 to 1968/69. 4. The accelerated growth rate in world output of cocoa in the early 1960's may be attributed to a combination of favourable weather conditions and extensive technical developments throughout the decade of the fifties, particularly in the first five years. Crop failures because of poor weather occurred in 1951/52 and 1957/58, whereas in the early 1960's weather was generally favourable. In 1964/65 world production reached a record level of 1.5 million metric tons due mainly to exceptionally good weather, particularly throughout Africa; the world rate of gain from the previous year was +24.8% and the reduction in the following year from the peak level, -19.1% (see Table 7). 5. Meantime technological developments were also at work. By the end of World War II swollen shoot disease, was spreading in Africa, mainly in Ghana. It was brought under control in the early 1950's due to extensive cutting out of infected trees and replanting with high yielding stock. New cocoa areas were also opened up in Ghana. The disease was not as widespread or as severe in Nigeria. However, the rate of replanting in Nigeria to replace trees passing their maximum yield period was not sufficient throughout - 2 - the fifties. In other areas in Africa new cocoa plantings were extensive. At the same time, increased use of fertiliser and mass spraying against capsid disease was undertaken in Ghana and Nigeria and to a lesser degree in other African areas. 6. The most recent period (1965/66 to 1968/69) was dominated by unfavourable weather conditions, particularly in 1965/66 and 1968/69 in Ghana and Nigeria, where excessive rain ruined the crop. The lower level of output in Ghana may also be due to the removal of the subsidy on spray- ing in 1966, after the price of cocoa (in 1969 dollars) had fallen to a record low of 19.1 cents in 1965. In Nigeria political unrest and labour problems in the cocoa area have partly caused the contraction in production. At the same time the absence of sufficient replanting in the 1950's has also curtailed output. Elsewhere in Africa there has been a fairly steady expansion. In Central and South America there has been a gentle rise in output and also in Oceania due to the steady ircrease in Papua and New Guinea. Thus world production of cocoa in 1965/66-1968/69 averaged 1.3 million metric tons compared with the 1964/65 peak level of 1.5 million metric tons (see Table 7). In 1968/69 world output amounted to only 1.25 million metric tons. 7. Turning to demand, the re-opening of the European market and the removal of all wartime controls in the United States by 1946, stimulated demand for cocoa products at a time when supplies were relatively short, particularly during the first half of the 1950's. Actually the entire decade was characterised by short supplies and high prices (see Table 4). The real pricel/ for cocoa, spot New York, averaged 48.3 cents per lb. in 1950-54 and 40.7 cents in 1955-59 compared with 36.9 cents over the long term (see Table 5). Undoubtedly these price levels encouraged the various technical developments noted in paragraph 5. 8. The world cocoa situation shifted from shortage to plenty during the first half of the sixties. The 1960-65 price (in real terms) averaged 25.8 cents per lb. Notwithstanding a yearly rate of growth in grindings of approximately 7% (1960-65) compared with 3.8% previously (1954-59), stocks reached a record level of 5.7 months' supply of grindings at the end of 1965 and the average price for that year was extremely low (see Table 4). 9. After the mid-sixties, the supply/demand situation began to move from surplus to deficit and by 1969 a short supply situation was clearly evident. The price, in real terms, rose steadily, averaging 34.6 cents in 1966-69 compared with 25.8 cents in 1960-65. Actually the 1969 price of 45.7 cents was higher than in any of the individual years from 1950 to 1969, except 1954 and 1958, as shown in Table 5. Although the curtailment in world grindings was severe, stocks were also drawn down considerably. From 1966 to 1969 the annual rise in world grindings was infinitesimally small, 0.1%. Cocoa manufacturers economise on the use of chocolate by reducing the size of the 5 cent chocolate bar, by increasing the use of 1/ In terms of 1969 dollars. -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ - 3 - fruits and nuts, and by using more white chocolate coatings made from vege- table oil in the expensive boxes of chocolates. Formerly, when the average actual price was around the 25 cent level, 30 cents was considered the sub- stitution point for cocoa. In present circumstances, it is not known what the rule-of-thumb substitution point is since the long term price now averages above 35 cents (see Table 5). It is fairly evident, however, that the prices in real terms for 1968 and 1969, at 35.8 cents and 45.7 cents respectively, have stimulated the use of substitutes and economy in the use of cocoa butter. 10. A fairly reliable yardstick that has been used for judging the mrld cocoa situation is the level of stocks in terms of months' supply with respect to grindings. As shown in Table 4, stocks were generally short during the fifties, ranging from a high of 4.5 to a low of 2.5 months' supply with respect to grindings, (the 10-year average was 3.45 months' supply). During the first half of the, sixties stocks were at record high levels, particularly at the end of 1965 (5.7 months' supply). Commencing in 1966, however, stocks have declined steadily and by the end of 1969 were 2.6 months' supply. Until the past year the stock policy of cocoa manufacturers, on a global basis, appeared to be one in which a minimum working level of stocks was 3 months' supply, when prices were relatively high, and a maximum level of 6 months' supply, when prices were relatively low. Notwithstanding the low stock level reached at the end of 1969, however, prices do not appear to have re-acted or to be re-acting in accordance with this past pattern. This suggests that the cocoa industry may be changing its stock- holding policy. 11. According to Table 4, stocks at the end of 1970 may reach the record low level. In contrast the monthly average spot price has fallen from an average of 48.6 cents in November 1969 to 34.8 cents in February 1970 and 34.0 cents in the first half of March. (Table 6 shows the monthly average of prices for the past three years compared with the monthly averages for three years in the mid-fifties when 1953 end-stocks were also abnormally low.) The manufacturers seem to be adjusting to a very much lower stock level than they have maintained in the past; otherwise prices would still be increasing in 1970 as they did in 1953 and 1954. The high cost of financing stocks and the relatively low world production of the past three years have probably induced manufacturers to operate on a new minimum level of stocks. III. FUTURE PROSPECTS 12. This section presents a revised projection for the period 1970/71 to 1974/75 based on additional data since our last projection and making new assumptions regarding manufacturers' stock-holding policies. The projections of production are based on estimates by the Bank's Area and Agriculture Projects Departments, except that for some of the smaller producers the author has made the estimates. Because cocoa tree numbers by age groups, yields per tree, yields per acre, details of future planting programmes and cost-of-production data are not readily available, it is impossible to determine objectively what present or future output capacity (tlven average weather, etc.) is or will be, or to estimate precisely what effect price will have an output. In addition very little information is available as to the alternative crops of comparable value to cocoa in the larger producing regions. The decelaration in production growth during the last half of the sixties does not seem to be related to any diversification activities (i.e. either uprooting of trees and planting alternate crops or keeping cocoa output static and planting other crops on areas outside the cocoa area). The important factors seem to have been weather conditions and the absence of replanting over the long term, particularly when prices were relatively low. 13. The method of calculating the price projection for cocoa from 1971 to 1975 is briefly as follows. World production has been estimated (as already noted), year-by-year and country-by-country as shown in Table7; these estimated world figures were applied as given. Certain assumptions are stated regarding end-stock levels. To absorb the production and to have a level of end-stocks as assumed, the market is then cleared of any excess on the basis of historically derived income and price elasticities of demand (as represented by estimated grindings)O The various estimates and assumptions are discussed in the following paragraphs under the headings of production, stocks, grindings and projected prices. Table 8 sets out the statistical calculations to arrive at the projected prices. 14. Before proceeding with the projection period 1970/71 to 1974J75, the current year 1969/70 is discussed since it has been excluded from the calculations because the price behavior so far this season appears to be abnormal. According to present information, as shown in Tables 4 and 7, world production during the current season (1969/70) may amount to 1.3 million metric tons. This is expected to go more or less entirely into grindings during 1970. On the other hand, the estimated level of global production may be on the low side since there is a possibility that Ghanaian production may turn out to be higher than the most recent forecast level of 376 thousand metric tons. According to the latest information available Ghanaian production could be closer to 400 thousand metric tons and this would result in a level of world production of 1.36 million metric tons. Applying a similar calculation for 1970, as shown in Table 8, assuming a production level of 1.36 million metric tons and alternative end-stock levels of 2.7, 2.5 or 2.0 months' supply with respect to grindings, the price (in 1969 dollars) could be 45.0 cents, 41.6 cents or 38.3 cents per pound, respectively. These price projections seem to be on the high side, in view of the very recent levels as shown in Table 6. On the other hand cocoa was sold forward rather heavily during the first few months of the crop-year, resulting in a sharp fall in price. When the selling pressure is removed, prices may very well turn upward later in the season. The statistical position does not seem to warrant a continuing price decline during 1970. A reasonable, perhaps conservative, judgment for the average actual price during 1970 may be approximately 35 cents, provided cocoa manufacturers continue a stock policy of holding relatively low stocks. -5- Production (1) Ghana 15. During the fifties, new plantings offset trees going out of production, resulting in a fairly steady annual level of production av- eraging about 242 thousand metric tons, as shown in Table 1. The intro- duction of capsid control spraying and the earlier replanting with both Amelonado and Amazon varieties of trees raised the average level of production to over 400 thousand tons by the mid-sixties. By the end of the sixties, however, the level of output had declined to just over 300 thousand metric tons as shown in Table 7. This reflected a number of factors: unusually bad weather, disbanding of the Cocoa Division from 1962 to 1966, which left the farmer without any focal point where he could obtain guidance, reduction in research activities, removal of the subsidy on spraying, and lack of adequate planting materials. 16. For the next five years barring a recurrence of unusually un- favourable weather, there should be a substantial rise in Ghana's output from the low levels of the past two years because many of the problems mentioned above have been corrected. The distribution of gammalin (insecticide) is now under the jurisdiction of the Cocoa Marketing Board and should result in its wider and perhaps more efficient use. The Board also has the authority to extend credit to farmers. Research activities will probably increase because of the establishment of an Institute for Cocoa Economic and Social Research (this is a co-operative effort of the University of Ghana and the Cocoa Marketing Board). Continuing work on the improvement of production conditions is important, particularly research on cocoa pests. Granted it may take a little time before these efforts bear fruit. From the 1964/65-1968/69 average level of 428 thousand tons (time span covers a bumper crop and an abnormally low crop) the government is planning on a 1.5% yearly increase to 463 thousand metric tons by 1974/75. By 1980 the potential level of production may be considerably higher than the 1974/75 projection provided there is incentive for the cocoa farmer to look after his trees and replant when necessary. (2) Nigeria 17. Although production in Nigeria has shown a marked expansion during the latter part of the 1950's (1956/57 to 1961/62) due to some replanting of the early 1950's and to increased spraying, average output in the next 5-year period (1961/62 to 1966/67) showed marked decelaration due to political unrest, poor weather and the very low rates of replanting over a long period of time prior to that period. Over the five years (1970/71 to 1974/75) as indicated in Table 7 production is expected to expand at just over 4% yearly which is fairly comparable with the past five-year period. This may be an optimistic assumption. The 1974/75 estimate may be on the high side because it is doubtful that any sizeable cocoa development programme has been undertaken during the period of political unrest when replanting and new plantings should have been under- taken to offset declining yields because of the age of the trees. On the other hand, given stable political conditions in the future, the expected - 6 - price level in the next few years should encourage more use of technical means to improve output. (3) Other Africa 18. The remaining 32% of African production is accounted for by at least 12 individual countries, the largest of which are Ivory Coast and Cameroon. It is fairly evident that production by the mid-1960's in these two countries reflected the increased plantings caused by relatively high prices during the late forties and throughout the fifties. In the Ivory Coast acreage more than doubled from 1948-52 to 1965. Cocoa production was being encouraged in that country as an alternative to coffee when coffee prices were declining. According to latest information,L/ pro- duction is expected to continue upward, reaching approximately 215 thousand metric tons by 1974/75. A similar trend in Cameroon production is also expected due also to new plantings, giving an increased yield, coming into bearing. (4) All others 19. Within Latin America, where at least 20 countries grow cocoa, Brazil is by far the largest producer, accounting for about one-half of the regional total. A replanting programme has been started in Brazil and by 1975 it is hoped that 35,000 hectares will have been replanted. With an expected improvement in yields when the new trees begin to bear, production by 1974/75 may be about 210 thousand metric tons conpared with a current level of about 158 thousand metric tons. Throughout the rest of Latin America the price level in the early postwar years stimulated new plantings and output may be expected to continue to rise gently. 20. In the remaining areas (Oceania and Asia) the leading producer is Papua and New Guinea. Here, there has been a significantly steady growth (except in 1965/66), which is likely to continue.-/ 21. To sum up, the available country supply projections result in a world production estimate of 1.75 million metric tons by 1974/75, as shown in Table 7. From the base period 1967/69 this implies a yearly increase of 4.1%. This would mean a resumption of an accelerated rate of growth as compared to the 1965/66-1968/69 period, but at a lower rate than the preceding period of fast growth. Over the long term, 1946 to 1975, the rate of growth may be 3.6% yearly. This compares favourably with the past rate of expansion from 1946 to 1969 (see paragraph 3). It should be noted that no allowance has been made in these estimates for a drastic crop failure or a bumper crop due to weather conditions. Changes in weather may alter the level of output in any one year by as much as +25% from the previous year. In the year following the good or bad weather, output usually resumes its normal level for that year. 1/ IBRD Agriculture Projects estimate. 2/ Current Economic Position and Prospects of the Territory of Papua and New Guinea, EAP-8a, September 3, 1969. - 7 - SHARES OF WORLD COCOA BEAN PROIXJCTION, ACTUAL AND PROJECTED (Percentage) Actual Projected 1934J35- 1954/55- 1961.65- 1969/70- 1974/75 1938/39 1958/59 1968/69 1973/74 Africa 66.6 62.6 72.6 72.3 72.8 Ghana 38.7 29.0 31.9 28.0 27.6 Nigeria 13.7 12.9 17.5 17.7 18.6 Ivory Coast 6.4 7.4 10.4 12.0 12.2 Cameroon 3.4 7.9 6.8 8.7 9.0 South America 23.6 26.9 18.9 19.0 18.6 Brazil 16.9 19.6 11.4 11.8 12.0 Central America 8.6 8.9 5.9 5.6 5.1 Asia 0.8 0.7 0.6 0.6 o.6 Oceania 0.4 0.9 2.0 2.5 2.9 Papua and New Guinea /a 0.4 1.6 2.1 2.4 WCRLD 100.0 100.0 100.0 100.0 100.0 /a Negligible. Source: Tables 1 and 7. 22. It is noted from the above table that the output projections imply that there may be a shift in the shares of world production, particu- larly within the African area. There has been a steady increase in the share of world production for Ivory Coast, Cameroon and Papua and New Guinea and these trends may be expected to continue until the mid-seventies. In contrast the shares of the three traditionally largest producers (Ghana, Nigeria and Brazil) follow different paths. Ghana's share may contract to approximately 28% by 1974/75 compared with 32% in 1964/65-1968/69 and 39% thirty years earlier (1934/35-1938/39). For Nigeria, its share may increase slightly, while Brazil's share remains about the same after declining fairly sharply from 1954/55-1958/59 to 1964/65-1968/69. Of the six countries mentioned, Papua and New Guinea is the only new area where cocoa growing has been successfully introduced since World WJar II. Many other attempts at cocoa growing, particularly in Malaysia, have proved to be unsuccessful. Since 83.9% of the average production from 1963/64 to 1967/68 was exported, this table serves to indicate how the shares of the world cocoa export market may work out by 1975. 23. Beyond 1975 it may be that the rate of expansion in world production will accelerate. This may be due mainly to Ghana (see paragraph 16). Such - 8 - a situation suggests that Ghana's lower share ofthe market may be temporary until after 1975. Stocks 24. Regarding the future level of stocks, it has been assumed that cocoa manufacturers, stocks may remain relatively low (2.5 months' supply) through the end of 1971 but they will increase to three months' supply by the end of 1972, assuming lower prices materialize as expected in 1970 and 1971 compared with 1969. For the remaining three years a level of three months' supply has been assumed, as shown in Table 8. It is expected that manufacturers may continue their present policy of operating on a consider- ably lower stock level than in the past because the high cost of financing and of carrying cocoa may continue. Moreover, stocking would tend to strengthen the price level as shown in Table 8 and it is assumed that cocoa manufacturers will find it in their interest to avoid such action. The projected growth in world output, which is fairly comparable with the long term growth rate, does not suggest a structural surplus which would deprzss prices as in former years. Until the new stock-holding policy of the manufacturers has been in operation long enough to establish a relation- ship for calculating a price elasticity of stock ratios, the level of stocks suggested above is the judgment of the author. It is hoped that these judgments can be discussed with leading traders in due course and adjusted where necessary. Grindings and Price 25. The base period selected for estimating the secular growth in grindings related to income growth is 1967/69, when grindings averaged 1,368 thousand metric tons with an average real price of 37.5 cents per pound, spot New York. The actual grindings in 1968 amounted to 1,403 thousand metric tons and the average real price was 35.8 cents. The 1950-6 average real price was 36.8 cents; this was the period covered for the computation of the price elasticities of demand resulting in a range of -0.2 to -0.42. For the calculations in this paper a price elasticity of -0.3 has been used. In these circumstances the selected base period seems fairly reasonable. An income growth of 5$ yearly and a short run income elasticity of +0.3 has been assumed.!/ On this basis, grindings from the base of 1,368 thousand metric tons are expected to expand at 1.5% yearly at a real price of 37.5 cents per pound, spot New York as shown in Table 8. 26. In order to absorb the projected world cocoa production level and to have a level of end-stocks as indicated in paragraph 24, the required level of grindings and the required price from 1971 to 1975 was calculated as shown in Table 8. 27. The required level of annual grindings at the corresponding real price levels, as shown in Table 8, implies a yearly increase in demand 1/ World Cocoa Outlook, The Current Economic Position and Prospects of Ghana, Volume II, AW-6a restricted, May 6, 1969. - 9 - (grindings) of 3.3% from the base period, 1967/69, to 1975, compared with only 0.1% yearly from 1966 to 1969 and 6.9% from 1960 to 1965 or 4.2% yearly over the entire period, 1960 to 1969. Ovrer the long term (1946 to 1975) the yearly expansion in grindings is expected to be 3.6% which compares with a long term 23-year growth rate (1946 to 1969) of 3.8%. 28. In accordance with the above assumptions the projected future trend of price may be as follows: FORECAST REAL COCQA PRICE /a (U.S. cents per lb. Spot N.Y.) 1971 35.3 1972 35.4 1973 30.4 1974 27.2 1975 25.3 /a In terms of 1969 dollars. 29. Assuming a rate of inflation of 2.5% yearly from 1969, the actual price for cocoa may be as follows: ESTIKATED ACTUAL COCOA PRICE, SPOr N.Y. (U.S. cents per lb.) 1971 37 1972 38 1973 34 1974 31 1975 29 30. For the five years, 1971 to 1975, the real price of cocoa may average 30.7 cents per pound which is slightly higher than the 1960-69 average of 29.3 cents. Within this past 10-year span, the first half was a period of mounting surplus when the price averaged 25.8 cents per pound and the last half, one of increasing deficits, when the price averaged 34.6 cents per pound. The average projected real price, which is approximately mid-way between the 1960-69 ranges, seems reasonable since supply and demand are expected to be in balance in the coming years with end-stocks of no more than three months' supply of grindings. * ith reference to Table 4, the years 1962 to 1964 may be considered as a period when supply and demand were roughly in balance and the average real price was 26.1 cents which is reasonably close to the projected real price toward the end of - 10 - the 5-year period. In actual terms, a projected price of approximately 30 cents per pound by the mid-1970's seems reasonable, when allowance is made for inflation and expected growth in both output and consumption, com- pared with a 1962-64 average of 23.2 cents per pound. 31. Although some of the limitations of this projection have already been cited, notably, that in any given year the world crop may differ greatly from the estimate due to weather, there are several others to recognise. If there is a marked change in the buying policy of the Soviet Bloc countries, the world grinding estimates may prove to be either too low or too high by a considerable amount since this group accounted for 14% of the world grindings in 1969. Lastly, as already noted, the end-stock estimate is a judgment rather than a calculation based on past data, due to an apparent recent shift in manufacturer's stocking policy. IV. INTERNATIONAL NEGOTIATIONS 32. Since 1956 international cocoa meetings - first under the auspices of the Cocoa Study Group of the Food and Agriculture Organisation of the United Nations and later under UNCTAD - have been taking place. Throughout these meetirgs the main item on the agenda has been the discussion of some form of stabilization scheme for cocoa. Three UN conferences have been held for the purpose of negotiating an International Cocoa Agreement all of which ended without result. The last conference in November/December 1967 considered a draft 5-year agreement whose mechanism consisted of maintain- ing the price of cocoa between agreed limits, establishing a sales quota system and operating a buffer stock. 33. In the meantime, the Secretary-General of UNCTAD called a cocoa working party meeting (June 1968). However, there were still too many points of disagreement, such as the size of country quotas and the price level for cutting them if necessary, distribution of votes, preferences and the treatment of exports of products from producing countries, to proceed to a negotiating conference. 34. In June 1969, UNCTAD convened a preliminary technical meeting, attended by Ghana, Nigeria, Brazil, Cameroon, Ecuador, Mexico, Ivory Coast, United States, United Kingdom, Germany F.R., Netherlands, Soviet Union, Switzerland, and France, to discuss some of the outstanding problems (in particular, definition of cocoa and cocoa products, treatment of sales on terminal markets, exports of products, long term contracts, fine and flavour cocoa, and non-members; and details of export controls and sales quotas). It was hoped that the 1 countries would be able to settle many of these problems before proceeding to a negotiating conference. On the last day of the meeting, however, one of the delegations presented a statement calling for an increase in the price range from 20 to 29 cents, as set out in the December 1967 draft agreement, to 25 to 34 cents per pound. In view of the lack of agreement between the countries, the Secretary- General indicated that he would be willing to conduct bilateral consulta- tions with major producers and consumers to see whether the draft of the - 11 - agreement as it stood at that time could be salvaged. 35. In October 1969, the Producers' Alliance (Brazil, Cameroon, Ghana, Ivory Coast, Nigeria and Togo)!/ asked UNCTAD to intensify bilateral dis- cussions with a view to getting the governments to meet and to resume negotiations for an international agreement. 36. In December 1969 the Secretary-General of UNCTAD had private talks with six countries (Ghana, Brazil, Ivory Coast, United States, United Kingdom and France) to ascertain whether there was a genuine desire for a scheme to regulate the trade of cocoa. The results of these discussions have not been published. 37. It should be noted that the yearly price projection, as given in this paper, has not made any allowance for the operation of an International Cocoa Agreement from 1970 to 1975. In present circumstances, it is assumed that an agreement would not be in operation during the early part of the 1970's. 1/ This alliance was formed in July 1964 for the purpose of "ensuring adequate supplies of cocoa to the market at reasonable prices". Actually in mid-October 1964 they suspended sales until the beginning of February 1965 in an effort to try to raise prices and to reduce stocks in consumers' hands. This move was not successful since all the member-countries were not willing to suspend sales and some of them reportedly sold below the minimum level. Table 1 : WORLD PRODUCTION OF COCOA BEANS, BY MAIN PRODUCERS ----:YEAH AVERAGES 19314/35-1938/39 TO 19614/65-1968/69 (Thousand metric tons, crop year-October/september) 19314/35- Share 1939/140- Share 19144/45- Shape 19149/50- Share 19514/55- Share 1959/60- Share 19614/65- Share 1938/39 per cent 19143/144 per cent 1918/149 per cent 1953/514 per cent 1958/59 per cent 1963/64 per cent 1968/69 per cent Africa Ghana ~~~~283 38.7 230 35.9 223 33.5 2142 31.9 2142 29.0 1407 35.5 1428 31.9 Nigeria /a 100 13.7 99 15.5 95 114.3 101 13.3 108 12.9 187 26.3 2314 17.5 Ivory Coast 147 /b 6.14 29 /b 14.5 38 5.7 514 7.1 62 7.14 87 7.6 ]140 10.14 Cameroon,/a 25 7b 3.14 25 Tb -3.9 143 6.7 56 7.14 66 7.9 78 6.8 91 6.8 Togo 973 1.2 37b 0.5 3 0.14 5 0.6 6 0.7 11 1.0 17 1.3 Equatorial Gui.nea 12 1.6 214 2.2 16 2.14 17 2.2 22 2.6 29 2.-6 35 2.6 Sao Tome & Principe 10 /b 1.14 7/b 1.1 9 1.14 8 1.2 8 1.0 9 0.8 11 0.8 Conigo, D. R. 17b- 0.1 1Tb 0.1 I 0.1 2 0.3 14 0.5 6 0.5 5 0.14 Others (6 countries) 1 7b 0.1 3T7b 0.5 2 0.2 5 0.6 5 0.6 8 0.7 12 0.9 Total (1488)- (66.6) (1411)- (614.2) (1430) (614.7) (1490) (614.6) (523) (62.6) (822) (71.8) C973) (72.6) South America Brazil ~~~~1214 16.9 127 19.8 1221 18.6 132 17.14 1614 19.6 135 11.8 153 11.14 Ecuador A8 2.5 114 2.1 17 2.5 23 3.0 26 3.1 38 3.3 56 14.2 Colombia 11 1.5 11 2.0 11 1.7 15 2.1 12 1.5 15 1.3 18 1.3 Venezuela 17 2.3 114 /b 2.1 17 2.5 16 2.1 16 1.9 114 1.2 214 1.8 Others (3 countries) 3/b 0.14 5 0.7 5 0.8 7 0.9 7 0.8 7 o.6 3 0.2 Total (173)- (23.6) (171) (26.7) (1714) (26.1) (193) (25.5) (225) (26.9) (209) (18.2) (2514) (18.9) Central America Domiynican Republic 23 3.1 23 3.6 27 14.0 32 14.2 32 3.8 38 3.3 28 2.1 Mexico 1 0.1 1 0.1 14 0.6 8 1.1 114 1.7 23 2.0 25 1.9 Costa Rica 7 1.0 5/b 0.8 14 0.6 5 0.6 8 1.0 11 1.0 9 0.7 Trinidad & Tobago .14 1.9 7 Th 1.1 5 0.8 8 1.1 8 1.0 6 0.5 5 0.14 Others (10 countries) 18 2.5 12 1.9 114 2.1 13 1.7 12 1.14 13 1.1 11 0.8 Total (63) (8.6) (148) (7.5) (514) (8.1) (66) (8.7) (714) (8.9) (91) (7.9) (78) (5.9) Asia (14 countries) 6 0.8 5/b 0.8 14 0.6 5 0.7 6 0.7 7 0.6 8 0.6 Oceanxia New Guinea & Papua /c /c /c /c 1 0.1 I 0.1 3 0.14 11 1.0 22 1.6 Others 3 0h 7 /b 07 3/b 0.14 3 0.14 14 0.5 5 0.5 5 0.14 Total (3 /b) (0.14) (5 7-b) (0.8) (14 Tb) (0.5) (14) (0.5) (7) (0.9) (16) (15) (7 20 WORLD 733 100.0 6140 100.0 666 100.0 758 100.0 835 100.0 1,11L45 100.0 1,3140 100.0 /a West Cameroon for the years 19314/35-1938/39 and 1939/140-1943/144 is included in Nigerian figures and excludedt from Cameroon figures. /b Exports. /c Negligible. Source: Cacao, A Review of Current TIrends in Production, Price and Consunption, Commodity Series Bulietin No. 27, November 1955, FAO. Cocoa Statistics, Vol. 3, No. 1, January 1960 and Vol. 8, No. 3, JulY 1965, Vol. 12, No. 14, October 1969, FAD and revised figures 1967/68 and 1968/69 by FAD as of October 28, 1969. Table 2: WORLD EXPORTS OF COCOA BEANS, BY VOLUME, 1947-51,.1952-56, 1966 TO 1968 (Thousand rmtric tons) Share Share Share Share Share 1947-51 Per cent 1952-56 Per cent 1966 Per cent 1967 Per cent 1968 Per cent Africa Ghana 235 35.4 224 32.0 398 35.6 335 30.9 335 32.0 Nigeria 107 16.1 106 15.1 193 17.3 248 22.8 209 19.9 Ivory Coast 49 7.4 65 9.3 124 11.1 105 9.7 121 11.5 Cameroon 44 6.6 53 7.6 85 7.6 70 6.5 66 6.3 Equatorial Guinea 16 2.4 17 2.4 39 3.5 33 3.0 40 3.8 Togo 3 0.5 9 1.3 17 1.5 17 1.6 14 1.3 Others (10 countries) 13 2.0 18 2.6 26 2.3 30 2.7 30 2.9 Total (467) (70.4) (492) (70.3) (882) (78.9) (838) (77.2) (815) (77.7) Latin America Brazil 106 15.9 107 15.3 112 10.0 il4 10.5 76 7.2 Ecuador 21 3.2 26 3.7 32 2.9 45 4.2 65 6.2 Dominican Republic 25 3.8 22 3.2 30 2.7 24 2.2 25 2.4 Venezuela Y5 2.2 17 2.4 12 1.1 12 1.1 14 1.3 Others (18 countries) 23 3.5 27 3.9 23 2.0 24 2.2 23 2.2 Total (190) (28.6) (199) (28.5) (209) (18.7) (219) (20.2) (203) (19.3) Asia 3 0.5 3 0.5 4 0.4 3 0.3 4 0.4 Oceania Papua and New Guinea - - 1 0.1 18 1.6 21 1.9 24 2.3 Others 3 0.5 4 o.6 4 0.4 4 0.4 3 0.3 Total (3) (0.5) (5) (0.7) (22) (2.0) (25) (2-3) (27) (2.6) WORLD TOTAL 663 100.0 699 100.0 1,117 100.0 1,085 100.0 1,049 100.0 Source: FAO, Cocoa Statistics, October 1969. Table j e RELATIVE VALUE OF COCOA BEAN EXPORTS TO TOTAL EXPORTS, 1966 TO 1968 (Percentage) 1966 1967 1968 Ghana /a 62.4 64,8 65.7 Equatorial Guinea /b /b /b Nigeria 100 22.5 24.6 Togo 19.0 29.7 24.1 Cameroon 21.5 25.8 23.0 Ivory Coast 17.1 17,3 18.5 Ecuador 9.2 12.4 18.5 Papua anu New Guinea 8.9 17.8 16.7 Domir,ican Republic 709 7.5 803 Brazil 2.9 3.6 2.45 'YORLD Export value in million U.S. aollars /c 457 596 675 Tote: The value tigures for the individual countrieb were from Inter- national Financial Statistics9 IMF, January 19709 FAO Traae Yearbook 19689 and FAO Cocoa Statistics, 1969 except for Ghana - The Current Economic Position and Prospects of Ghana, AWI-6a April 1969 ana for Papua ana New Guinea - Current Economic Position ano Prospects of the Territory of Papua ana New Guinea, EAP-8a September 1969. /a Includes products. 7b Data for value oI total exports are uncertain; the approximate share tor cocoa is ebtinateQ above 50%. /c Traae Yearbooks FAO except 1968 which is preliminary based on a combination of the State of Food and Agriculture 1969 and FAO Cocoa Statistics, October 1969. TatDle 4: WORLD COCOA. SITUATION, 1946 TO 1969 (Thousdnd metric tons) (1 5 (2) ~~~(.s J4) 5) ---~ (6) (7) -- Calculatea N.Y. Spot Accra 1% Allowance Surplus + Stocks Col. (>) in Terms Fully Fermented Production on Production Grinaings Deficit - End-year of Months' Supply U.S. 0 per lb. 1946 641 637 677 - 40 214 3.8 11.5 1947 674 667 658 + 9 223 4.1 34-.*9 1948 626 620 622 - 2 2?1 4e3 39.7 1949 762 754 719 + 35 256 4.3 21.6 1950 765 757 795 - 38 218 3.3 32.1 1951 812 804 762 + 42 260 4.1 35.5 1952 64Ž 636 720 - 84 175 2.9 35.4 1953 798 790 800 - 10 165 2.5 37.1 1954 781 773 731 + 42 207 304 57.8 1955 799 791 726 + 65 272 4.5 37.5 1956 841 833 820 + 13- 285 4.2 27.3 1957 899 890 905 - 15 270 3.6 30.6 1958 769 761 838 - 77 193 2.8 44.3 1959 905 896 860 + 36 229 3.2 36.6 1960 l,04 1,030 926 + 104 333 4.3 28.4 1961 1,17LL 1,162 1,034 + 128 L61i 5.3 22.6 1962 1,142 1,131 1,119 + 12 473 5.1 21.0 1963 1,173 1,161 1,151 + 10 483 5.0 25.3 1964 1,213 15,;0l 1,197 + 4 487 4.9 23.4 1965 1,514 1,499 1,345 + 154 641 5.7 17.3 1966 1,225 1,213 1,382 - 169 472 4.7 24.4 1967 1,345 1,332 1,362 - 30 442 3.9 29.1 1968 1,367 1,353 1,403 - 50 392 3.4 34.4 1969 1,2e49 1,2_6 1,340 - 104 288 2.6 45.7 1970/1 1,332 1,319 1,332 - 13 275 2.5 /1 FAO ebtimate as of October 28, 1969 (production and grindings). See the source on the following page. WORLD COCOA SITUATION, 1946 TO 1969 (Cont'(l) Page 2. Source: Production (crop-year, October/September, is shown under calendar year for latter part of crop-year) 1945/46 to 1950/51, Cacao, A Review of Current Trends in Production, Price ana Consumption, Commodity Series Bulletin No. 27, FAO, November 1955. 1951/52 to 1968/69, various issues of Cocoa Statistics, FAO. Grin gs (calendar year) 1946 to 1951, Cocoa Market Report 177, Gill ano Dulfus, October 5, 1964. 1952 to 1969, various issues of Cocoa Statistics, FAO. Calculated "total stocks" The difterence between world production, adjusted tor 1% loss in weight during the movement of supplies trom producing to consuming countries, and world grindings is assumed to be the yearly carry-over. "Total stocks" are an accumulation of the yearly carry-overs, making no allowance tor cocoa, which may have been destroyed in the producing country. Since actual total stock iniormation is not publishea, the basis for t-e calculations is as follows: For the period 1946 to 1969, the ena-1956 figure was useo as the starting point for the calculations, both forwara ano backwards since FAO in their CCP/Cocoa/62/4, 1 April 1962 paper indicatea that total eno-stocks in 1955/56 amountec to 290 thousanu metric tons (it was reduced by 5 thousand tons because the consumption iigure usea at that time was later revisea upward by 5 thousand tons). Price Trade Policies ana Export Projections Division, Economics Department. Table 5 : COCOA PRICE, YEARLY AVERAGE, NEW YORK SPOT ACCRA (FULLY FERMENTED), 1913 TO 1969 (U.S. cents per pound) Year Actual Real/I Year Actual Real/l 1913 13.9 41.1 1946 11.5' 19.7 1914 12.4 37.b 1947 34.9 48.6 1915 16.7 49.7 1948 39.7 51.0 1916 14.2 34.9 1949 21.6 29.2 1917 11.2 19.7 1918 12.9 20.3 1919 18.6 27.7 192o 13.4' 17.9 1950 32.1 41.e 19021 7.8 16.> 1951 35.5 41.5 1922 9.2 19.6 1952 35.4 42.5 I 3 7.6 15.6 1953 37.1 45e2 19ZL4 7.6 16.o 1954 57.8 7U.3 192- 9-s 19.0 1955 37.5 L45.5 1926 11.5 23.7 1956 27.3 32.1 1927 15.8 34.1 1957 30.6 34.9 192H 12.9 27.5 1998 44. 3 49.9 1)29 j10-4 22.6 1959 36.6 41.1 193k 8.1 19.J 1960 28.4 31.9 i9ji 5.2 14.7 1961 22.6 25.5 193 i 4.4 14.0 1962 21.0 23.6 1933 4.4 13.8 1963 25.3 28.- 1934 5.z 14.3 1964 2j.4 26.3 199 ' 5.0 12.9 1965 17.J 19.1 1936 6.9 17.6 1966 24.4 26.0 1937 8.4 20.1 1967 29.1 3u.9 1°9T 5.2 13.7 1968 34.u 35.8 1969 45.7 45.7 1913-38 av. 22.4 1946-69 av. 36.9 1946-59 av. 42.4 1960-69 av. 29.3 1954-59 av. 45.6 1960-65 av. 25.8 1966-69 av. 34.6 /1 Aajusted by the U.S. General Wholesale price inaex 1969 = 100. Source: Traae Policies ano EXport Projections Division, Economics Department. Table 6: COCOA PRICE: NEW YORK SPOT ACCRAq BY MONTHS FOR SELECTED YEARS (U.S. cents per pound) 1952 1953 1954 January 33.1 31.8 51.3 February 35.8 30.0 54.4 March 38.4 32.8 57.6 April 38.1 33.9 61.7 May 38.4 33.4 65.7 June 37.8 34.6 65.6 July 38.1 37.7 69.1 August 35.4 4o.3 66.1 September 33.3 40.8 54.9 October 34.8 40.7 47.4 November 31.8 44.3 51.9 December 30.8 45.9 48.1 Yearly average 35.4 37.1 57.8 End-stocks (in terms 2.9 2.5 3.4 of months' supply) 1967 1968 1969 1970 January 27.5 31.6 44.7 39.1 February 29.7 29.8 44.4 34.8 March 29.1 30.2 44.4 34.0 (March April 27.9 30.6 44.6 1-13) May 27.9 29.9 44.7 June 28.3 29.1 46.1 July 27.6 29.7 47.8 August 28.3 30.9 45.8 September 30.4 36.8 45.3 October 29.4 39.4 47.0 November 31.0 46.o 48.6 December 31.3 48.7 44.9 Yearly average 29.1 34.4 45.7 End-stocks (in terms 3.9 3.4 2.6 of months' supply) Source: Trade Policies and Export Projections Division, Economics Department. Table 7: COCOA - WORLD PDDUCTION PROJECTED TO 1974/75 (Thousand metric tons ) First Actual estimate Projected 1963/64 1964/65 1965/66 1966/67 1967/60 1966/69 M96977 1970/71 197V72 1972/73 1973/74 1974/75 Africa Ghana 428 581 416 381 424 339 376 406 432 457 478 483 Nigeria 220 298 185 267 235 186 203 269 279 290 315 325 Cameroon 85 91 79 87 93 103 110 130 137 143 150 158 Ivory Coast 98 148 113 150 147 145 160 175 185 195 205 215 Togo 14 17 16 17 18 19 17 17 17 17 17 17 Equatorial Guinea 33 35 35 35 33 38 38 38 39 40 40 40 Others 22 26 22 28 28 31 34 34 34 35 35 36 Total (900) (1,196) (866) (965) (978) (861) (938) (1,069) (1,123) (1,177) (1,240) (1,274) South America Brazil- 122 119 171 173 147 156 158 165 179 200 205 210 Ecuador 36 48 36 53 76 65 60 (110 111 112 o10 115 Colombia 16 18 17 18 18 19 19 Venezuela 21 22 23 23 25 25 26 ( Others 4 4 5 3 3 4 3 Total (199) (211) (252) (270) (269) (269) (266) (275) (290) (312) (315) (325) Central America DDminican Republic 41 25 31 28 29 25 30 Mexico 17 21 24 25 27 28 29 Costa Rica 10 11 7 10 9 8 7 Trinidad & Tobago 5 5 5 4 6 5 6 Others 11 13 11 11 11 12 12 Total (84) (75) (78) (78) (82) (78) (84) 84 85 87 88 90 Asia 7 7 8 7 9 9 10 10 10 10 10 10 Oceania New Guinea & Papua 17 21 18 21 24 27 29 29 31 33 37 42 Others 6 4 3 4 5 5 5 6 7 7 8 8 Total (23) (25) (21) (25) (29) (32) (34) (35) (38) (40) (45) (50) WORLD 1,213 1,514 1,225 1,345 1,367 1,249 1,332 1,473 1,546 1,614 1,698 1,749 Source: Cocoa Statistics, Vol. 12, No. 4, October 1969 FAO and revised figures for 1967/68 and 1968/69 and first estimate for 1969/70 by Comaittee on Statistics, FAO Study Group on Cocoa, October 27-28, 1969; for projection period see text of paper. Table 8: DATA FOR PRICE FORECAST (thousano metric tons) 1971 1972 1973 1974 1975 Beginning stock 302 /a 303 367 393 415 Production less 1% (Table 7) 1,458 1,531 1,598 1,681 1,732 Supply 1,760 1,834 1,965 2,074 2,147 Grindings at real price of 37.5 cents 1,430 1,452 1,474 1,496 1,518 Calculated grinoings /b 1,457 1,467 1,572 1,659 1,718 (1,518) (1,610) Requirea increase or decrease in grinoings +27 +15 +98 +163 +200 (+66) (+ 92) Real price to absorb increase at price elasticity 0.3 (cents per lb. Spot, N.Y.) 35.3 35.4 30.4 27.2 25.3 (32.3) (30.8) End Stocks In terms of months' supply 303 367 393 415 429 2.5 3.0 3.0 3.0 3.0 (316) (537) (2.5) (4.0) Note: The figures in brackets show alternate figures at 2.5 months' supply in 1972 anu 4.0 months' supply in 1975. /a End 1970 stock after adjustment for production from 1,332 to 1,360'thousand metric tons. 7E Production plus beginning stocks minus annual grindings (x) equals end stocks at 2.5 or 3.0 months' supply (2.5x or 3.0x 12 J