Pilot project on price risk management for cocoa farmers

DURATION:
 Two years
LOCATION:
 COTE D’IVOIRE
NATURE OF PROJECT:
 Risk Management
ESTIMATED TOTAL COST:
 US$ 384,762
FINANCING COMMITED BY CFC:
 US$ 272,622
CO-FINANCING
 US$ 10,500
COUNTERPART FINANCING
 US$ 101,640
PROJECT EXECUTING AGENCY (PEA):
 Bourse du Café et du Cacao (BCC)
PROJECT SUPERVISORY BODY:
 International Cocoa Organization (ICCO)
PROJECT STARTING DATE:
 February 2006
COMPLETION DATE:
 March 2008

 

Brief Description

The main activities of the project were identification and training of staff of cooperatives and banks to participate in the project; preparation and implementation of pilot operations on hedging strategies; and evaluation of the results of the pilot operations.

 
Project Objectives

The overall objective of the project was to develop and implement a price risk management strategy for cocoa farmers in Côte d’Ivoire. This would reduce the exposure of smallholder cocoa farmers to price fluctuations on the international market. It would also help to develop capacity to enable farmers and their organizations to make more rational production and investment decisions, based on more realistic assumptions and price expectations.

 
Project Results

Training materials on price risk management were developed. Representatives of local institutions and cooperatives were trained on price risk management strategies. Sources of price risk at farm-gate were identified. Hedging instruments (POPS and Puts) mitigating these sources of risk were adequately selected. Hedging contracts were drafted and approved by all parties involved. Hedging strategies were implemented on the London and New York cocoa option markets.

Click here to download the Project Completion report (PCR)