Nigerian cocoa price falls on strong bean supply

Fri 7 Dec 2007, 13:34 GMT
By Tume Ahemba

LAGOS, Dec 7 (Reuters) - The upcountry price of Nigeria's graded cocoa beans fell by 2 percent to 220,000 naira ($1,865) per tonne on average in the last three weeks on increased supply, exporters and farmers said on Friday.

Despite the slight drop, traders in the world's number five cocoa grower said the local price was still strong when compared to international market prices, making export unattractive.

"When you compare the local price to the international price it is still high so it is difficult to break margins if you are exporting," one exporter told Reuters.

Prices in the main cocoa export cities of Lagos and Calabar in the southeast were stable at 230,000 naira a tonne on average, exporters said.

London cocoa futures were little changed just below Thursday's 4-month high in brisk volumes as operators cleared up positions before expiry of the December contract on Dec. 12, dealers said.

December was up 2 pounds at 1,010 pounds per tonne while March was down 1 pound at 1,037 pounds.

Improved quality of Nigerian cocoa with mould level at a 5 percent average and good bean weight also helped sustain demand, farmers and buyers said.

Most exporters accept mould levels not higher than 5-7 percent so traders have to dry the beans mechanically before shipping them to Europe.

Supply has increased because drier weather with long sunny spells in the key growing zones after months of above-average rainfall made it easier for farmers to ferment and dry their beans, growers and buyers said.

STRUGGLING TO BUY

More transporters are moving beans from the bush to grading centres as roads that were potholed quagmires due to rains are passable thanks to the drier weather, they added.

Traders said the local price has remained strong due to the stiff competition for beans between exporters and local grinders whose capacity has grown sharply in the last few years largely as a result of favourable government policies.

"Even local processors are struggling to buy beans at the current price level," said another exporter, who is also involved in local processing.

Farmgate prices for ungraded beans also eased slightly to 210,000 naira a tonne in the southwest region and 212,000 naira in the southeast, from 215,000 naira three weeks ago, Licensed Buying Agents (LBAs), who buy beans upcountry for exporters, said.

Exporters in the southeast cocoa hub of Ikom in Cross River state attributed the strong price of graded beans to the influx of banks in the area. Ikom, a 15-minute drive to the Cameroon border, has seen a boom in business in the last few years due to the rapid rise in its output.

"The banks are giving money to traders who used to depend on exporters for cash, so everybody is just buying directly from the bush," one exporter told Reuters by telephone from Ikom. Following is a table of estimated Nigerian cocoa prices in naira as quoted by farmers, LBAs and exporters:

LOCATION Dec 7 NOV 16
Farmgate 210,000 215,000
Upcountry from LBAs 220,000 225,000
Lagos ports from LBAs 230,000 230,000

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