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

Delfi

27/03/2015 21:18

* 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 
 
 (Adds cocoa prices, FACTBOX links) 
    By Joe Bavier 
    ABIDJAN, March 27 (Reuters) - A spate of corporate mergers 
between major cocoa and chocolate players could reduce farmers' 
choices and bargaining power, lowering incomes to levels that 
could threaten the sector's future, growers and campaigners 
warned on Friday. 
    "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. 
    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 bought Britain's Armajaro Holdings' coffee and cocoa 
trading arm, and Barry Callebaut AG  BARN.S  bought Petra Food's 
 PEFO.SI  cocoa ingredients business. 
     
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
    FACTBOX on ADM, Olam cocoa businesses:  ID:nL1N0U002T  
    FACTBOX on ADM, Cargill cocoa businesses:  ID:nL1N0R32GJ  
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
     
    Konan said companies expanding their business should ensure 
they benefit 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. 
    Benchmark cocoa futures prices are volatile with the London 
market  LCCc2  up 50 percent from 2011 lows but down 22 percent 
from the 33-year high in 2010.  
         
    PROTECTING FARMERS' INTERESTS 
    Olam will increase its cocoa processing capacity to 16 
percent of world supply with its acquisition of ADM's cocoa 
business.  ID:nL1N0U01QE  
    Growing market concentration will decrease farmers' already 
weak bargaining power, warned Antonie Fountain, managing 
director of the Voice Network, which campaigns to improve the 
lives of farmers. 
    "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 urged 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." 
 
 (Additional reporting by Marcy Nicholson in New York, editing 
by David Evans and David Gregorio) 
 ((joe.bavier@thomsonreuters.com; +225-0-707-4101; Reuters 
Messaging: joe.bavier.thomsonreuters.com@reuters.net)) 
 
Keywords: COCOA FARMERS/