Ivory Coast agrees to pay cocoa farmers more for their beans

The world’s top producer of the chocolate ingredient will offer 1,500 CFA francs ($2.46) a kilogram for the mid-crop harvest that runs to Sept. 30, Minister of Agriculture Kobenan Kouassi Adjoumani said Tuesday in Abidjan. That’s a 50% increase on payments for the main-crop season that just ended.

The move may help ease the global cocoa shortage as growers now have more incentive to hand over beans for processing and export. There’s been concern some are holding back deliveries in the hope of higher prices. The increase may also spur investment in farms where trees are aging and vulnerable to disease.

Cocoa futures fell as much as 1.7% to $9,952 a ton in New York, reversing earlier gains.

The payments remain well below levels on the world market and more will be needed to buck the legacy of low farmer remuneration in West Africa. That means there’s still a risk some growers will keep hold of beans in anticipation of another hike next season, according to data firm Tropical Research Services.

“It’s a small step in the right direction but not a giant leap,” said Steve Wateridge, head of research at the firm. “They are still paying farmers far lower than the current international price,” he said, adding that neighboring Ghana may be forced to follow suit to deter smuggling.

The dwindling output in Ivory Coast and No. 2 producer Ghana has driven cocoa prices to multiple records this year. New York futures reached a fresh intraday high earlier Tuesday before reversing course.