July 30, 1984

Gloom over cocoa pact

Prospects of a new international agreement to stabilise the cocoa market have been undermined by differences at informal talks in London between producing and consuming countries. The aim of the discussions was to narrow the differences that prevented agreement between the two sides at the formal negotiating conference held in Geneva in May and so prepare the ground for a successful conclusion the next time round.

This will be in October. However, enormous difficulties will still face negotiators then.

The May negotiations were adjourned to allow further time for the study of the various proposals on the mechan- ism that a cocoa pact should use to regulate supplies and prices. A decision has already been taken that a buffer stock arrangement will be the main regulatory tool. The differences centre on what back-up system is needed.

Producers favour export quotas, while the EEC - the dominant consumers has proposed a "withdrawal system". Many delegates were hoping to hear precise details of how this novel scheme would work. This was not forthcoming, as EEC members have yet to agree among themselves on the technical aspects.

The Community, however, was able to give some further elaboration. Under its scheme, producers would be required to withdraw cocoa from the market if buffer stock purchases alone were insufficient to keep the price above an agreed minimum, or its financial reserves were near exhaustion.

All countries producing more than 10,000 tonnes a year would be expected to participate in the scheme. The amount of cocoa each would be re- quired to withdraw, however, has yet to be worked out.

The withdrawn cocoa, the EEC proposes, should be put under international control and only released when rising prices warrant it. Producers, moreover, would be expected to pay for shipping the cocoa to ware- houses in temperate regions for storage and also finance the cost of holding the stock material.

Before the next formal negotiations, the EEC plans to have finalised details of its scheme, some aspects of which may be modified in the light of the reactions it received from other consumers and from producers. Some observers, however, fear that this final draft may not be available until just before the October conference begins. The current pact, which was origin- ally scheduled to run out this year, was recently extended for 12 months. During the rest of its life, no further market support operations in its name will be undertaken.

The prices of cocoa, which earlier this year reached a five year peak, have since fallen back, as signs have mounted that the coming 1984-85 season will bring an increase in pro- duction and possibly a world surplus after the big deficits of the past two years.