Tuesday 16, October 2018 by Bloomberg

Cocoa default risk rises as Ivorian banks are said to curb loans


Cocoa exporters in Côte d’Ivoire are finding it harder to purchase beans as lenders are curbing financing, raising the risk of contract defaults, according to people familiar with the matter.

Banks in the world’s top cocoa producer are reducing their exposure to the sector after the liquidation of Ivorian processor and shipper Saf-Cacao, said the people, who asked not to be identified because the information isn’t public. As a consequence, some smaller and local shipping companies are not able to buy and store the beans they need to fulfil their export contracts, said the people.

Saf-Cacao left lenders exposed to about XOF 150 billion ($265 million) in outstanding debts when a court on 18 July ordered the sale of its assets to pay creditors, people familiar with the matter said at the time. Most shippers would’ve obtained their export contracts prior to this date, when Côte d’Ivoire already sold more than 80 per cent of the bigger of the two annual harvests that began this month.

Shippers’ difficulty to access finance has prompted industry regulator Le Conseil du Cafe-Cacao to start calling lenders to discuss their clients’ ability to access credit and determine the potential impact of the problem, according to people familiar with the matter.

A spokeswoman for the regulator declined to comment when contacted by phone.

A financing crunch could result in another season plagued by defaults as shippers that bought export rights can’t get hold of physical beans. In the year through September 2017, defaults for more than 200,000 metric tons of cocoa exacerbated a collapse in prices as the regulator had to resell contracts in the middle of bumper crops from West Africa that oversupplied the market.

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