Big cocoa mergers pose risk to farmers and sector, growers say

Delfi

27/03/2015 17:57

* Last years have seen spate of mergers and acquisitions 
    * Farmers worry deals will reduce their bargaining power 
    * Resulting lower farmer prices could lead growers to quit 
cocoa 
 
    By Joe Bavier 
    ABIDJAN, March 27 (Reuters) - A spate of corporate mergers 
between major cocoa and chocolate players risks reducing 
farmers' choices and bargaining power, lowering incomes to 
levels that could threaten the sector's future, growers and 
campaigners said on Friday. 
    Mergers, either completed or under way, in recent years 
include the fusion of Cadbury and Mondelez  MDLZ.O , Archer 
Daniels Midland's  ADM.N  sale of its chocolate arm to Cargill 
and its cocoa business to Olam International  OLAM.SI . 
    Swiss agricultural commodities trader Ecom Agroindustrial 
Corp is also purchasing Britain's Armajaro Holdings' coffee and 
cocoa trading arm, and Barry Callebaut AG  BARN.S  bought Petra 
Food's  PEFO.SI  cocoa ingredients business. 
    "We could face a kind of monopolistic situation that would 
have an impact on the farmgate price," Edmond Konan, executive 
secretary of the World Cocoa Producer Association (WCPA), said 
on the sidelines of an International Cocoa Organization meeting. 
    The WCPA, which represents farmers from nine cocoa producing 
nations, was recently created to lobby for the interests of 
growers and represent them in dialogue with the industry. 
    In expanding their businesses, Konan said companies needed 
to ensure they benefited the entire cocoa supply chain, 
particularly farmers. 
    "They need to bear this in mind, because if farmers are not 
making money, they will do something else. They will cut down 
their cocoa trees and plant other commodities," he told Reuters. 
         
    PROTECTING FARMERS' INTERESTS 
    Olam buys around 500,000 tonnes of cocoa annually, and it 
said it will increase its processing capacity to more than 
700,000 tonnes, or 16 percent of world supply, with its 
acquisition of ADM's cocoa business.  ID:nL1N0U01QE  
    The deal will allow Olam to compete better with industry 
leaders Barry Callebaut and Cargill. 
    However, Antonie Fountain, the managing director of the 
Voice Network -- a group that campaigns to improve the lives of 
farmers -- said such market concentration will decrease farmers' 
already weak bargaining power. 
    "The fact that you have fewer global players dictating the 
game of supply and demand that the commodities markets depend on 
means you can be sure that farmers' interests are going to be 
less served by such a price-setting mechanism," he said. 
    Fountain called upon governments to scrutinise mergers under 
competition law and potentially take action to ensure companies 
do not develop dominant positions at home that could hurt 
farmers in other countries. 
    "In the corporate field, it makes sense to try to expand 
your activities and absorb your competitors," ICCO executive 
director Jean-Marc Anga told Reuters. "Whether this is the right 
approach in the interest of the farmer remains to be seen." 
    
 
 (Reporting by Joe Bavier, editing by David Evans) 
 ((joe.bavier@thomsonreuters.com; +225 07074101; Reuters 
Messaging: joe.bavier.thomsonreuters.com@reuters.net)) 
 
Keywords: COCOA FARMERS/