(Ecofin Agency) - In order to stop default in payment in Cote d’Ivoire’s cocoa sector, the international audit firm KPMG is advocating the establishment of a cash market system for local cocoa exporters.
Unlike the futures market, which offers buyers predetermined pre-harvest cocoa contracts, the cash market, also known as the real market, allows for the commodities’ negotiation as well as immediate delivery and payment.
This new system should help limit speculation by small shippers that defaulted on 148,000 tons of cocoa during the 2016/2017 season.
“These defaults in payments occurred when members of SMEX / COOPEX [ed: a major Ivorian coffee-cocoa exporter] tried to compete with largest companies and wanted to increase their revenues by focusing on a rise in cocoa world prices instead of securing contracts,” the firm indicated.
According to KPMG estimates, SMEX / COOPEX‘s members currently purchase 23% of the futures contracts issued by the Coffee-Cocoa Council (CCC).