World cocoa output and price variabilities: implications for economic development of exporting countries
AbstractPrice index analysis was used to determine the degree of cocoa price variation at the international market. The price of cocoa between 1991and 2002 was used for the study. Monthly and annual averages of daily price of cocoa beans were calculated using the average quotations of London cocoa terminal market and New York coffee, sugar and cocoa terminal market. The London prices were converted into United States dollars per tonne. The revelation of the study shows that between 1991 and 1995 the unit prices of cocoa at the world market changed sixty times and between 1996 and 2002, it changed 90 times, meaning that the unit prices of cocoa at the international market changed on a monthly basis. Also, the annual unit prices of cocoa increased from 56% to 95% between 1991 and 2002. It was observed that between January 1991 and December 1993 monthly unit prices of cocoa increased by 112% while between January 1991 and December 1995 it rose by 106.3%. The unit prices of cocoa beans oscillated between 10% and 16% from September 1994 to February 1995. Interestingly, between 1996 and 1998, the prices of coca increased at a constant rate of 2%; and June 1998 to December 2000 witnessed a drop to 2 negative digits of –32.5%. However, there was a dramatic increase from 20% in January 2002 to 82% in October 2002. From the foregoing, it can be inferred that, there exists erratic cocoa price fluctuation at the international market, which could impact negatively on exporting countries and workers in agriculture particularly. This is so because, the instability in cocoa prices results in poor budget preparation and planning, market uncertainty, irregular income, and improper fiscal policy formulation. The effect of these prolonged fluctuations can be cushioned by the formation of trade alliance by exporting countries to see how best they could stabilize the market. Also the exporting countries should develop local processing industries to process some cocoa beans into finished goods at home, as a means of reducing the quantity supplied to the international market. Formation of effective trade union(s) and cartel could be another positive option for a reduction in cocoa price uncertainty at the international market.
Keywords: world cocoa output, price variabilities, and implications
Global Journal of Agricultural Sciences Vol. 4(2) 2005: 183-189