Cocoa is backing up at Ivory Coast's warehouses and ports, international exporters told Reuters, saying that domestic companies have been securing export rights at auction for beans they can no longer afford.
Three exporters estimated that 15,000 to 20,000 tonnes of cocoa were in trucks outside the top grower's ports of Abidjan and San Pedro. Another 30,000 to 40,000 tonnes, they said, were in merchants' warehouses in the interior waiting for buyers.
"We're buying the volumes we need, conforming to our export permits, but others are not. It's pushing co-operatives and middlemen to come with their bean cargoes looking for potential clients," said the director of one export company in Abidjan.
Exporters told Reuters that the bottleneck was partly because of increased caution at banks, making it more difficult for smaller businesses to obtain lines of credit.
However, they also said that much of the problem had been caused by exporters who failed to lock in prices with counterparties, speculating that global prices would rise.
Ivory Coast's marketing board, the Coffee and Cocoa Council (CCC), sells forward its cocoa in an auction system in which companies bid on the right to export specific volumes during a fixed time period - a permit known as a deblocage.
It then uses the average auction price to fix a guaranteed price to be paid to farmers.
The CCC auctioned the 2016/17 crop from September 2015 to September 2016 and global cocoa prices have since fallen.
POTENTIAL DEFAULTS?
"There are companies with deblocages but who don't want to buy beans because they speculated and would be hit by losses if they bought and exported," one European cocoa trader said.
"Sooner or later the CCC will have to take a decision, because it's clear that certain exporters ... can no longer honour their engagements."
The CCC's head of sales denied that exporters had circumvented regulations meant to prevent price speculation.
"The (CCC) verifies the counterparty contracts that are furnished by the exporters," Eric Koffi told Reuters. "That doesn't mean that there won't be cases of default. In those cases, the foreseen measures will be applied."
However, the measures applied by the CCC in such instances would be a less costly option for the companies than exporting at the lower prices.
The CCC last week denied a Reuters report that it plans to cancel about 300,000 tonnes of cocoa contracts on the verge of default and resell them.
According to CCC data seen by Reuters, the 14 biggest domestic exporters secured the rights to export 365,000 tonnes of cocoa for the October-March main crop. By the end of December, they had bought 141,000 tonnes of beans.
The GNI, one of two Ivorian exporter associations, voiced concern over the situation in a letter last week.
"Given that only export permit holders can buy and export the corresponding physical cocoa, as long as the CCC doesn't cancel these export permits by declaring defaults ... we'll have a blockage in the buying system," it stated.
(By Ange Aboa; Writing by Joe Bavier; Editing by David Goodman)
