COM-WATCH AFRICA ISSUE 44 | JANUARY 2015

OLAM TO BUY ADM’S COCOA BUSINESS TO CREATE GLOBAL FIRM Full Story On Page 7

Coffee: Master Blenders Bid Mali Exports Over 37 Million Kenya Government To Audit Tea For Mondelez 17Tons Of Mangos 25Sector Value Chain 33 AFRICACOM-WATCH ISSUE 44 | JANUARY 2015

Contents 03 / General 20 / Cotton, Textiles & 30 / Sugar Leather Goods 03 / Banana 33 / Tea 24 / Fish 05 / Cashew, 35 / Timber Groundnut & Shea 25 / Foodstuffs & Flowers 37 / Tobacco 07 / Cocoa 27 / Palm & 17 / Coffee Edible Oil

Top Stories

7

Olam To Buy ADM’s Cocoa Business To Create Global Firm

17

Coffee: Master Blenders Bid For Mondelez

25

Mali Exports Over 37 Million Tons Of Mangos

33

Kenya Government To Audit Tea Sector Value Chain

1 CMA CGM Marseille Head Offi ce THE AFRICAN COMMODITY REPORT 4, Quai d’Arenc 13235 Marseille cedex 02 France Brought to you by CMA CGM / DELMAS Marketing Tel : +33 (0)4 88 91 90 00 www.cmacgm.com Website: www.delmas.com Email: [email protected] Disclaimer of Liability Tweet: @DelmasWeDeliver CMA CGM / DELMAS make every effort to provide and maintain usable, and timely information in this report. No responsibility is accepted for the accuracy, completeness, or relevance to the user’s purpose, of the information. Accordingly Delmas denies any liability for any direct, indirect or consequential loss or damage suffered by any person as a Rachel Bennett Dominic Rawle result of relying on any published information. Conclusions drawn from, or actions undertaken on the basis of, such data and information are the sole responsibility of the reader.

News Headlines By Region Western Africa

Benin: Lowers Cotton Farmgate Price Cameroon: 206,391 Tonnes Exported Up To October 31 / Farmgate Prices Dip In December On Tax, Rising Supply / Cocoa Bean Exports At 73,283 Tonnes / Average Farmgate Price Drops 1.6% / World Cocoa Foundation Assists CICC’s New Generation Project / Wet Weather Takes a Bite Out Of Cocoa Income / Log Stockpile At Douala Finally Moving Cote d’Ivoire: International Cashew Processing Equipment And Technology Show / BOAD Grants 2 Billion FCFA For Cocoa Production / ICCO Cautions Over Strong Ivorian Output / 2013-14 Production At 1.7 Million Tonnes / Arrivals At 675,000 Tonnes By Dec 21 / Crop Helped By Rain, Mild Harmattan Wind / Cocoa Stranded As Rains Disrupt Trucking / Contracts Handed To Local Exportersporters / Ivory Coast Set To Lead Cocoa Processing / San Pedro Cocoa Plant Inaugurated / Farmers Paid US$1 KKgg For 2014-15 Season DRC: Feronia Leading The Shift In ‘Palm Oil Power’ To DRC Gabon: DekelOil Secures Palm Oil Sales Deal With Gabon Conglomerate Ghana: Cocoa Board Intensifies Programs To Increase Productivity / SATTIFS Project Boosting Productionduction / US$450 Million For Cocoa Roads Rehabilitation / COCOBOD To Meet Target / DekelOil Ramps Up PProductionroduction At Ayenouan Palm Project / 2015 Budget Targets Forestry Development Plans / Illegal Timber Trade Expectedxpected To End Soon / EXIM Bank To Boost Exports Guinea-Bissau: Government To Increase Cashew Exports Mali: Mali Revises Down Forecast For 2014-15 / Exports Over 37 Million Tons Of Mangos Mauritania: Senegal Granted Fishing Licences Mozambique: IFAD Finances Agriculture And Artisanal Fisheries / US$6.2 Million For Aquaculture Developmentent Nigeria: 2014 Sees Bumper Harvest / Exporters Expect N18 Billion Negotiable Duty Credit Grant / Farmers SSeekeek Government Support In Packaging / Stakeholders Seek New Industry Deal And Regulator / Output Target Att RisRiskk Due To Disease / Farmgate Cocoa Prices Jump on Slow Harvest, Naira / Towards Self-Sufficiency In Crude PPalmalm Oil Production / Zero Duty Threatens Local Industry / PZ Wilmar Invests US$650 Million In Oil Palm Estates Senegal: Mango Industry Receives Export Boost Eastern Africa

Regional: EAC Cooperative Societies Bill Seeks To Stimulate Trade Ethiopia: Record Exports After Brazil’s Drought Kenya: Output To Rise 22% In Next 2-Crop Years / Sector Faces Test As MP’s Debate Sale Of Millers / Industry To Cut Costs Before Safeguards Removed / Sharp Drop In Sugar Imports / Government To Audit Tea Sector Value Chain / Government Releases Ksh442 Million Input Subsidy / Companies Issue Profit Warnings / Sacco To Raise Sh500 Million In New Share Float / Prices Hit Rock Bottom As Production Peaks Tanzania: CCM Wants Privatised Cashew Plants Revived / 2014-15 Earnings Lag Last Season / TANICA Prepares To Join DSE / Tanzania Cotton Revival Plan / Regional Cotton Centre In Pipeline / Review Of Sugar Import Permits / US$550 Million Sugar Project Uganda: November Coffee Exports Down 17% Yr-Yr / Exports To Slow Into January / 2014-15 Cotton Output Seen Climbing On Global Prices

Southern Africa

Namibia: Hong Kong Halts Oyster Imports After Detects Cadmium / More Control On Livestock Exports To South Africa South Africa: Apples Gain Access To Chinese Market / US Chicken Trade / Illovo Sugar H1 Earnings Fall 10% Zambia: 2013-14 Cotton Output Falls Zimbabwe: Tobacco Exports Earn US$730 Million

2 COMMODITY NEWS GENERAL

EAC Cooperative Societies Bill Seeks To Stimulate Trade

The level of optimism is high among co-operatives in East Africa, in light of the ongoing East African Community [EAC] Co- operative Societies Bill 2014 being pushed to be enacted into law. The bill, being advanced by the regional members of Eastern Africa Farmers Federation [EAFF], seeks to realise and enhance the engagement of the co-operative movement in the EAC integration process.

Co-operative movements were hit by challenges from the 1970s through to the mid-2000s, but the agenda is fast-gaining momentum and stimulating a lot of interest across the region. The bill is attaining considerable support from all regional stakeholders. It seeks to bond the scattered cooperatives across the region to work for a common good. The Bill intends to harmonise national co-operative laws in the EAC partner states, and to provide a framework for co-operatives to exploit the EAC regional integration agenda. In a business sense, the bill considers boosting effort in helping members of cooperatives especially farmers to get a clear understanding of the EAC Common Market protocols which will, at the end, ease regional trade for the benefit of members.

The Bill proposes to permit co-operatives to draw their membership from any of the EAC partner states. This means that a coffee co-operative union in Uganda can have members that are coffee primary co-operative societies from Burundi, Kenya, Rwanda or Tanzania. Different cooperatives in have varying degrees in terms of competitive advantage in production, trade and advocacy; therefore, merging regional capabilities will make them emerge stronger.

As of 2013, Kenya is reported to have the highest number of registered co-operatives in East Africa, at about 15,000; the co- operative movement in Kenya is the most advanced in Africa. According to the International Co-operative Alliance [ICA], 18 of the largest 20 SACCOs in Africa are from Kenya. In addition, according to the World Co-operative Monitor Report of 2014, Co-operative Bank of Kenya is the 70th largest co-operative in the world [and largest in Africa] in terms of turnover over GDP per capita. Tanzania and Uganda each reported at least 9,000 registered co-operative societies in their respective countries, most of which are agriculture-related co-operatives. In Uganda, agriculture co-operatives account for over 50% of co-operatives in the country. In Rwanda, there are over 6,000 registered co-operatives. [EAC 28/11/14]

3 COMMODITY NEWS BANANA

Cameroon 206,391 Tonnes Exported Up To October 31

The Banana Association of Cameroon [Assobacam] note Cameroon has exported 206,391 tonnes from January to October 2014 with Société des plantations du Haut Penja [PHP], a subsidiary of the Marseille-based fruit company, at lead position with 84,950 tonnes exported up to October 31, 2014. The public agro- foods company, Cameroon Development Corporation [CDC], comes in second with 67,689 tonnes in exports. Partnered with America’s Del Monte it also produces rubber and palm oil. [Business in Cameroon 26/11/14]

4 COMMODITY NEWS CASHEW, GROUNDNUT & SHEA

Cote d’Ivoire International Cashew Processing Equipment And Technology Show

The International Cashew Processing Equipment and Technology Show 2014 [SIETTA 2014] attracted more than 5,500 participants. Held from November 26-28 in Abidjan the event was dedicated to the promotion of cashew processing equipment and innovative technology in Africa and the world. Presently, only 10% of the raw cashew nuts produced in Africa are processed locally. The remaining 90% of raw nuts are exported for further processing, leaving potential untapped. Plenary sessions and business to business [B2B] meetings with national and international cashew experts provided the opportunity to exchange ideas on processing-related topics such as finance and business planning, funding and smart investments, market dynamics and success factors that make cashew processing a profitable business in Africa. SIETTA 2014 was organised by the Ivorian Cotton and Cashew Board [CCA] under the sponsorship of the President of the National Assembly of Côte d’Ivoire. For further information about the show please view www.sietta2014.com [Graphic Online 27/11/14]

Guinea-Bissau Government To Increase Cashew Exports

The government of Guinea-Bissau wants declared cashew exports to increase from 150,000 to 200,000 tons per year. Guinea- Bissau produces more than 250,000 tons per year. Several players from the cashew sector, gathered to discuss strategies to monetize trade in the product. The meeting, organised by the Ministry of Trade, brought together farmers, small traders who buy cashews from nut producers, exporters, banks, the police and government. Meanwhile in the last cashew marketing year [April to September] over 70,000 tons were exported abroad from neighbouring countries, due to smuggling. [Macauhub/GW 15/12/14]

5 Nigeria 2014 Sees Bumper Harvest

The National Cashew Association of Nigeria noted that 2014 was a good year for Nigeria’s cashew producers, as they have enjoyed optimum harvest and great sales, with more exciting promises in the years ahead. The improved cultivation and the simple drying process applied also gave rise to quality cashew. Nigeria’s current annual production of cashew nuts is 120,000 MT and with renewed interest from the Government volumes are likely to triple in coming years. The next cashew season will begin in February 2015 with a further drive for quality management. [Daily Independent 06/12/14] Exporters Expect N18 Billion Negotiable Duty Credit Grant

The National Cashew Association of Nigeria [NCAN] says its exporters are expecting N18 billion in grant after the Federal Government lifted the suspension on the Negotiable Duty Credit Certificate [NDCC]. Members would benefit this from the N99 billion just released for Export Expansion Grant [EEG] announced by the Coordinating Minister of the Economy to boost exports. This will help to boost exporters especially as they prepare for the new cashew season. The EEG was suspended 4-years ago. NCAN also appealed to the government to provide pre-export and post-export incentives to farmers. Currently transportation is expensive, electricity tariff is high and accessing loans is difficult.

The EEG is a post shipment export incentive scheme designed to assist non-oil exports. The EEG and NDCC are valid and legal tenders for payment of any customs or excise duty. The Nigeria Customs Service published a public notice of beneficiaries of the first phase of the NDCC. In the notice, beneficiary companies were advised to proceed with their instruments to Customs Area Commands for redemption. Others that did not make the list were advised to wait for the next batch. [NAN 12/12/14] Farmers Seek Government Support In Packaging

The National Cashew Association of Nigeria [NCAN] has sought the Government’s support in repackaging of cashew in jute bags that would enhance the quality of the commodity. Farmers had been using polypropylene bags affecting quality as the material does not allow air penetration. NCAN has requested support in subsidising the procurement of the bags. [Daily Independent 03/12/14]

Tanzania CCM Wants Privatised Cashew Plants Revived

Ruling party, Chama Cha Mapinduzi [CCM], has called for cashew processing plants which have been turned into warehouses to be returned to the government, to ensure the crop is processed in the country to add value and boost the country’s economy. Over 90% of the raw nut are exported to Kerala in India for processing denying farmers maximum profits from the cash crops. The processing plants were privatised to improve production, but instead investors turned the plants into warehouses to store raw cashew before exporting them. Fluctuations in world market prices have also been a source of discontent for growers. [Daily News 28/11/14]

6 COMMODITY NEWS COCOA

General Olam To Buy ADM’s Cocoa Business To Create Global Firm

Olam International Ltd is to buy Archer Daniels Midland Co’s cocoa business for US$1.3 billion, catapulting the Singapore- based commodities merchant into the top tier of the niche bean processing industry. Buying one of the world’s largest processors and suppliers of cocoa liquor, powder and butter, Olam will secure 8-factories stretching from the Ivory Coast to Singapore with total capacity of 600,000 tonnes per year. Combined with Olam’s 5-bean grinding facilities and its global trading operations, the deal will create one of the largest players in the 4-million tonne industry, competing with Barry Callebaut and Cargill.

The deal is a “transformational opportunity” for the company, which has been revitalized following the takeover of Singapore sovereign wealth fund Temasek earlier this year. The transaction is expected to add to earnings and be free cash flow positive in the first full year after closing. The acquisition will also be seen as a bet on long-term growth in demand in Asia, where consumers’ appetites for candy and cookies is burgeoning. Even so, competition in grinding, which produces butter and powder used to make chocolate bars and drinks, has increased in recent year as major players expand capacity in Asia and margins have been squeezed by soaring, volatile bean prices.

For ADM, the deal comes just months after offloading its smaller underperforming chocolate business to rival Cargill for US$440 million, and dropping plans to sell its cocoa operations. With less overlap in regions like Europe, Olam’s takeover may have fewer competition concerns. ADM will redeploy capital to investments with better returns potential and less volatility than the cocoa business, or distribute excess capital to shareholders, or a combination of both. Olam will finance the purchase, which it expects to close in Q2 2015, through a combination of cash and existing debt facilities. JPMorgan is its financial adviser.

ADM Olam Chicago-based Singapore-based 8 processing facilities: Ontario, Canada; Koog aan de Zaan 5 processing plants: Nigeria, United Kingdom, Spain, Ivory and Wormer, the Netherlands; Mannheim, Germany; Ilheus, Coast and Indonesia, the last of which opened in May. Brazil; Abidjan, Ivory Coast; Kumasi, Ghana; and, Singapore. Total annual capacity of 600,000 tonnes p.a Processing capacity of 100,000 tonnes p.a

With the ADM assets, its total capacity will reach 700,000 tonnes [16% of world’s total capacity]. Olam said it is the largest player in cocoa sourcing in the world and expects to be sourcing 900,000 tonnes of beans per year after the deal is closed, or just over 20% of the world’s total production. [Reuters 16/12/14]

7 Market In Surplus In 2014-15

The global cocoa market will be in surplus for a second year as demand falls and output remains close to records downplaying concerns about shortages that fuelled a year-long bull run. JSG Commodities, the biggest raw sugar physical and futures broker in the United States, projected a slight decline in production in the 2014/15 season, which ends in September 2015, from a bumper crop in 2013/14 when top-producer Ivory Coast harvested a record 1.74 million tonnes. JSG sees a modest surplus of up to 50,000 tonnes.

Some investors worry a possible El Nino weather phenomenon could hurt crops in West Africa. Worries about a supply shortfall sent second-month cocoa prices on ICE Futures U.S. on their biggest and longest rally in years over the past year, hitting a 3-1/2-year high of US$3,349 a tonne on Sept. 25, 30% higher than the price a year earlier of $2,577 a tonne. Prices have since fallen 15 percent to US$2,854 a tonne on projections for another strong crop and subsiding fears about Ebola disrupting supply. Supply-and-demand forecasts for 2014/15 so far have ranged between a surplus from Barry Callebaut, the world’s biggest maker of industrial chocolate, to a deficit as big as 120,000 tonnes by commodities trader Olam International. The International Cocoa Organization [ICCO] has predicted supply deficits in the coming years following an estimated 53,000-tonne surplus in 2013/14, but said current stock levels were enough to ensure supplies until output rebounds. [Reuters 12/12/14] Cocoa Processing Gets US$750 Million Boost

The African Export-Import Bank [Afreximbank] has provided US$350m to support cocoa processing in the 4-major producing countries: Côte D’Ivoire, Ghana, Nigeria and Cameroon and plans a further US$400m cash boost in the future. The bank signed a Memorandum of Understanding [MoU] with the International Cocoa Organization [ICCO] to boost the African cocoa sector.

The deal will enhance Africa’s involvement in the cocoa supply chain, improving productivity and income for cocoa farmers and increasing cocoa consumption in Africa. 45% of the world’s cocoa was processed at origin in the 2012/13 cocoa season [Oct 13-Sept 14], up 6% on the previous season. African cocoa processing made up 20% of the global cocoa grind in the season just past, up 8% on the previous year. The ICCO expects Cote D’Ivoire to overtake the Netherlands as the world’s largest cocoa grinder in the next cocoa season as Olam opens its new cocoa plant in San Pedro in Q2 2014.

The 3-major cocoa processors are all present in Africa. ADM processes cocoa in Cameroon, Côte d’Ivoire and Ghana, while Cargill operates facilities in Côte d’Ivoire and Ghana. The world’s largest cocoa grinder Barry Callebaut owns 3-cocoa processing factories in Côte D’Ivoire and plants in Ghana and Cameroon and has just inaugurated its first chocolate plant in Chile. [All Africa 04/12/14] Barry Callebaut Sees Global 2014-15 Surplus

Barry Callebaut said there will be a global cocoa surplus this year and possibly the next, taking a more bearish perspective than some other forecasters so far but did not state the estimated size of the surplus for the 2014/15 [October/September] marketing year. The company has a surplus of cocoa beans opposite to the demand, so therefore prices should have a tendency to slide to the side or below. Meanwhile Olam International expects a global cocoa deficit of more than 120,000 tonnes in 2014/15 due to smaller crops in top growers Ivory Coast and Ghana and Commodities Risk Analysis reported the market could fall to a deficit in 2014/15. These forecasts come after the International Cocoa Organization [ICCO] raised its estimate for a 2013/14 surplus to 53,000 tonnes and said demand is likely to outstrip production in the next few years, though stocks were seen sufficient to ensure supplies. Barry Callebaut which already has plants in Brazil and Mexico, sees Latin America as ripe for growth as consumer purchasing power rises. It sees growth opportunities in Argentina and expanding into Colombia and Ecuador. [Yahoo News/Reuters 02/12/14]

8 COMMODITY NEWS COCOA

Decline In Cocoa-Butter Prices

Danish AAK AB, a leading supplier of fats to the chocolate industry, said the recent decline in cocoa-butter prices could protect chocolate demand after soaring costs started posing a threat to consumption. Cocoa butter prices have dropped 22% in the past 2-months, after more than tripling between the middle of 2012 and the end of 2013. Cocoa prices have also declined recently, though they remain at historically high levels, as chocolate demand outstrips supply. The International Cocoa Organization [ICCO] has forecast supply deficits in the coming year. The long-term average price for cocoa butter is about US$4,500 a ton. At the moment, the cocoa-butter spot price stands at US$6,681, down from more than US$8,500 earlier this year.

This year’s jump in cocoa prices has prompted chocolate makers such as The Hershey Co. and Mars Inc. to announce price increases to try to offset higher raw material costs, which could hurt demand for chocolate and in turn impact sales at AAK. Its chocolate and confectionery unit saw a 31% advance in operating profit in the first 9-months of the year as the equivalents benefited from the higher cocoa-butter price. The unit accounted for 28% of AAK’s sales in the period and 37% of its profit. Hershey said in July it would raise prices by 8% while Mars announced a 7% increase the same month. AAK’s clients have responded to rising costs by increasing prices by 8-12%.

AAK is seeking to double its operating profit from the 2010 level within the next couple of years and plans to increase production capacity in emerging markets to do so. The company is currently building an oils factory in Zhangjiagang, China, that is scheduled to start production in 2016 to cost US$54 million. It’s also constructing a factory in Sao Paulo, which will start production toward the end of 2015. AAK has in recent years entered Colombia and Turkey. [Bloomberg 02/12/14] Ivory Coast, Ghana May Face Slow Cocoa Season

Several bumper cocoa crops have left trees in Ivory Coast and Ghana fatigued raising concern that the world’s top 2-producers may struggle to rebound from a sluggish start to the season. Ivory Coast harvested a record crop of over 1.74 tonnes last season, topping a previous record set 2-years earlier. Ghana has roughly tripled its cocoa output over the past decade.

The Coffee and Cocoa Council [CCC], Ivory Coast’s marketing board, has already lowered its production target to around 1.6 million tonnes. Cocoa arrivals at Ivorian ports in the first 2-months of the 2014/15 season were down around 10% from the previous season. Ghana, meanwhile, saw a drop in cocoa purchases of nearly 62% through the first 3-weeks of the season. Ghana’s slow start may be related in part to delays in financing certified buyers but farmers blamed outbreaks of fungal black pod disease and a high mortality rate for flowers.

While the lower arrivals and purchases figures were largely anticipated by most traders, there remains disagreement over what will happen next. Optimists predict that arrivals between January and March, which saw an uncharacteristically deep dip last season, will largely offset the early slump. Others note the height of the dry season and the arrival of the dusty, desert Harmattan winds along with fatigued trees will struggle to resist harsh conditions particularly if they are amplified by El Nino weather patterns. [Reuters 05/12/14]

9 Cameroon Farmgate Prices Dip In December On Tax, Rising Supply

Cocoa farmgate prices in Cameroon dropped in December after 3-months of rises following a government decision to raise export duties and as output increased as the main harvest peaked. The National Cocoa and Coffee Producers’ Organisation [ONPCC] said farmgate prices had dropped to 1,200 FCFA/kg from 1,350 last month. Beans are abundant on the market as the October to January/February main crop peaked. Meanwhile the government is to raise cocoa export taxes to 150 FCFA/kg from 50 FCFA/kg, to provide more operating funds to industry regulators. The move has reduced the number of buyers and exporters and the remaining few have seized the opportunity to bring down the prices. Growers in the South-West Region expressed fear the export tax hike may lead to more beans being smuggled across the border to Nigeria. Farmers already face difficulties in transporting their produce to trading centres because of bad roads. An estimated 20,000 tonnes of cocoa beans were illegally exported to Nigeria from the South-West. [Reuters 14/12/14] Cocoa Bean Exports At 73,283 Tonnes

Cameroon exported 73,283 tonnes of raw cocoa beans in the season to end-November, down slightly from the 80,019 tonnes shipped by the same time last year. Tthe National Cocoa and Coffee Board [NCCB] noted in the month of November, Cameroon shipped 29,198 tonnes, down from 31,848 tonnes for the same month in 2013. The number of exporters in November rose to 21, up from 20 in October, with Telcar Cocoa topping the list with 9,029 tonnes. Figures were attributed to the start of the dry season, which made it easier to dry beans and transport them on roads sometimes impassable in the wet season. The season runs from Aug. 1 to July 31 with the main harvest from October to January/February and the low harvest from April/May to June/ July. [Reuters 23/12/14] Average Farmgate Price Drops 1.6%

Cameroon’s average national farmgate cocoa price fell by 1.6%, or 16 FCFA to 998 FCFA/kg from 1,014 CFAF/kg in the week ending Dec. 2, according to data from the Cameroon National Association of Cocoa and Coffee Producers: SW-Kumba 1,010 FCFA/kg, Mamfe 990, South 990, Center 1,000, Littoral 1,000. [Bloomberg 05/12/14] World Cocoa Foundation Assists CICC’s New Generation Project

The World Cocoa Foundation [WCF] and Cameroon’s Inter-professional Cocoa and Coffee Board [CICC] signed a financing agreement on December 11, 2014 in Yaoundé for US$125,000 [62.5 million FCFA] to assist 50 young cocoa farmers over 3-years within the framework of the New Generation programme. The CICC scheme, implemented 2-years, aims to rejuvenate cocoa production to ensure longevity in the sector. Now in its 3rd year the programme has assisted 362 cocoa producers who have created 566-ha of cocoa. [Business In Cameroon 22/12/14]

10 COMMODITY NEWS COCOA

Wet Weather Takes a Bite Out Of Cocoa Income

Southwest Farmers in Konye, one of the biggest cocoa-producing areas, are struggling to support themselves as unusually harsh weather takes a big bite out of their cocoa income. In recent years, prolonged and persistent rains during harvesting season have made it difficult for farmers to properly dry their beans. Grade A beans should have less than 5% moisture content, according to the agriculture non-governmental organisation Citizens’ Association for the Defence of Collective Interests [ACDIC]. The higher the moisture content, the less a farmer can charge for his produce. And with the rains in Cameroon lasting longer than usual, farmers find they need more time to dry their beans.

Cocoa is grown in 4 of Cameroon’s 10 regions, with the southwest accounting for 60% of national output. In the 2010-11 season, Cameroon hit a record of 240,000 tonnes. After a slip in 2011-12 due to attacks by pests and diseases, output is expected to reach around 235,000 tonnes in the current season. But while farmers are growing more cocoa than they have in previous years, the poorer quality of their produce means they make less money. Adding to worries, KONAFCOOP members note farmers often fall prey to unscrupulous buying agents, who in recent years have been taking advantage of the lack of moisture-testing machines at the region’s 7-main sales units. According to the National Cocoa and Coffee Board [NCCB] dried cocoa sells for 1,180-1,250 CFA/kg [US$2.25-2.40] but desperate farmers accept significantly less. Meanwhile the not-for-profit SNV Netherlands Development Organisation and the International Institute of Tropical Agriculture [IITA] supplied KONAFCOOP with 7-moisture-content testing machines in August. [Thomson Reuters 0/12/14]

11 Cote d’Ivoire BOAD Grants 2 Billion FCFA For Cocoa Production

To help the industry improve its cocoa beans processing rates, the West African Development Bank [BOAD] has promised 2 billion FCFA to finance the Ivory Cocoa Product Ltd’s capacity expansion project at its processing unit in San Pedro. The agreement was signed on December 24th by Oumar Tembely, Head of Mission at the West African Development Bank and Ishmael EL KHALIL, CEO of Ivory Cocoa Product Ltd. The project will also enable the government to achieve its goal to increase the rate of transformation of this raw material, currently from 35% to 50% in 2015. This loan is the second granted to Ivory Cocoa Product Ltd by the West African Development Bank. [Med Africa 30/12/14] ICCO Cautions Over Strong Ivorian Output

The International Cocoa Organization [ICCO] urged caution over signs of a strong start to the cocoa harvest this year, even as it underlined the country’s growing grip on the sector, and indeed raised its forecast for the world output surplus.

Arrivals of cocoa to Ivorian ports had as of November 9 hit 281,000 tonnes since the season started last month, up 9,000 tonnes year on year. However, it flagged the role of smuggling in boosting data, given the higher guaranteed price for cocoa in the country of 750 FCFA, equivalent to about $1,450 a tonne, than paid in neighbouring Ghana, until recent price revisions. Indeed, while the Ivory Coast crop of 1.741m tonnes in 2013-14 is, in theory, a record high, it may actually have fallen behind the 2010-11 result “if smuggling of cocoa is taken into account”.

Furthermore, the early results for 2014-15 may have been swollen by a decision to hold back supplies in expectation of a higher minimum price for this season. The country’s Conseil du Café-Cacao [CCC] regulator indeed raised to 850 FCFA [US$1,640 a tonne] its minimum price for farmers this season. It is estimated that stocks from the past season held by middlemen in anticipation of higher new minimum prices for cocoa, have amplified actual arrivals data. Nonetheless, the ICCO underlined the structural boost to Ivory Coast production prospects from “laudable” reforms which created the CCC and its regime of minimum prices to growers. With the rising trend in farmgate prices farmers are investing in their cocoa farms. The ICCO also forecast that in 2014-15 the country will become the world’s top cocoa processor, after a full year of contributions from OIam’s new plant in San Pedro, the latest in a series of sites opened by foreign giants in Ivory Coast.

The ICCO warns against ideas of a long-term cocoa supply crisis, lifting its forecast for the world surplus in 2013-14 by 13,000 bags to 53,000 bags. The revision reflects a record 4.37m tonnes in the estimate for the world production, as improved forecasts for Ivory Coast, Brazil and Nigeria more than offset downgrades to estimates for output in Ghana and Indonesia. Nonetheless, with consumption pegged at 4.29m tonnes, marginally improved from last time, the world stocks-to-use ratio of 38.9% at the close of 2013-14 was no better than that implied by the previous estimate, nor indeed an improvement on the 2012-13 figure. [Agrimoney 28/11/14] 2013-14 Production At 1.7 Million Tonnes

Cocoa production for the 2013/14 season rose to 1,746,204 tonnes, up from 1,448,992 tonnes the previous year. Ivory Coast is the world’s biggest producer of cocoa. A 20.5% rise in production was due to the government’s guarantee of prices to cocoa farmers, now in its 3rd year. [Reuters 24/12/14] Arrivals At 675,000 Tonnes By Dec 21

Cocoa arrivals reached 675,000 tonnes by Dec. 21 since the start of the season on Oct. 1 down from 795,000 tonnes in the same period the previous season. Exporters estimated around 74,000 tonnes of beans were delivered to Abidjan and San Pedro between Dec. 15-21, down from 90,000 tonnes during the same period last year. Meanwhile dry Harmattan winds descended on many growing regions as the rains ended, causing farmers to express concern over the potential negative impact of the seasonal weather phenomenon. [Reuters 22/12/14 & 15/12/14]

12 COMMODITY NEWS COCOA

Crop Helped By Rain, Mild Harmattan Wind

Unusually heavy rain and a mild Harmattan dry wind brightened the outlook for the last stage of the main crop, but the dry season elsewhere could tighten supply. Ivory Coast is in the dry season that runs from mid-November to March, when the dusty Harmattan wind that usually blows from the Sahara from December to March hits cocoa farming. The 2014/15 main crop harvest opened on Oct. 1 and farmers expect an abundant harvest of quality beans until the end of January. [Reuters 22/12/14] Cocoa Stranded As Rains Disrupt Trucking

Farmers are struggling to sell harvested beans after heavy rains disrupted transportation. Rainfall in San Pedro was 153.3 mm in the 10 days through Nov. 30, compared with 46.4 mm in the same period last year, according to the National Meteorological Service. Sassandra, also in the Soubre region, received 175.9 mm in the period, 6 times more than last year. Stocks are waiting for middlemen who cannot reach the farms. The rain has prevented beans from reaching ports with arrivals at buying stations near ports estimated at 62,000 MT from Nov. 30- Dec. 7, some 15,000 MT less than the 3-year average, according to Commodities Risk Analysis. [Bloomberg 12/12/14] Contracts Handed To Local Exporters

Ivory Coast has appointed 20 local exporters to handle international buying contracts as part of reforms to boost domestic companies.

The contracts, which involve the delivery of cocoa to buyers outside Ivory Coast, represent around 200,000 MT of the annual exports of roughly 1.5 million MT.

For the October to December period, the Coffee and Cocoa Council [CCC] attributed contracts totalling 40,000 MT to local exporters, with volumes varying from 500- 15,000 MT. The companies receiving the largest contracts include SONAMAT [1,500 MT] for Cargill, AGRICOM [1,500 MT] for ADM, and Novel SA Cote d’Ivoire [1,500MT] for Sucden. Africa Sourcing [AKA Armajaro Negoce] will handle contracts for 15,000 MT of cocoa and CNEK 1,500 MT, but the buyers were not identified.

A second list of exporters will be released in December for the first 3-months of 2015. Previously half of the contracts were allocated to exporters by the CCC while the international buyers chose the other half.

International firms, which export the vast majority of Ivory Coast’s cocoa, criticised the CCC’s decision to favour local exporters. In order to export to international buyers companies must secure supplies, condition the cocoa and pay all export fees before receiving payment. Some say they won’t be capable of keeping to their contractual obligations as they don’t have the necessary financial means to get the volumes. [Reuters 02/12/14]

13 Ivory Coast Set To Lead Cocoa Processing

Ivory Coast is set to become the world’s largest cocoa processor, overtaking the Netherlands as the state seeks to capitalise on its position as the top grower.

Cocoa processing, or grindings have jumped 10% in the 2013-14 season to 520,000 tonnes, ranking second behind the Netherlands, which processed 530,000 tonnes. According to the International Cocoa Organization’s [ICCO] quarterly report with the addition of a new processing plant launched by Olam in San Pedro, Ivory Coast is expected to become the world’s top processor next season. In the past, cocoa was shipped from producing countries mainly to Europe where it was processed. However, governments’ efforts to add value through grindings has increased the amount processed in Africa and Asia where cocoa is grown. For exporters, processing the commodity before it is shipped also cuts on costs thanks to a reduction in weight and waste. Grindings in cocoa growing countries increased almost 6% during the 2013-14 crop season, increasing the processing share of producing countries to almost 45% of the total. Africa registered the highest increase in processing, up by more than 8% to 860,000 tonnes. In Asia, Indonesia surpassed Malaysia to become the largest processor in the region with grindings up nearly 21% to 322,000 tonnes.

The ICCO data also reflects the impact of higher prices with world cocoa output for the 2013-14 period expected to hit a record 4.365m tonnes, up from the previous record of 4.309m tonnes in 2010-11. The main increase came from Africa, where production has jumped more than 12% to 3.185m tonnes, thanks to better weather and higher inputs such as fertiliser. A 3.4% rise in global grindings to 4.268m will mean that the overall market will see a supply excess of 53,000 tonnes in 2013-14 compared with a supply shortfall of 222,000 tonnes the previous year. Plentiful rains have meant Ivory Coast saw output rise 20% to 1.741m tonnes while Ghana’s production rose 7.4% to 896,917 tonnes. [All Africa 01/12/14] San Pedro Cocoa Plant Inaugurated

Puratos, a global leader in chocolate products, has inaugurated a collection and fermentation plant in Adjamené near San Pedro in partnership with the French chocolate maker, Cémoi. The move is in line with the Cémoi sustainability vision to promote a traceable cocoa. The first Puratos plant was opened in November 2013 in Vietnam. Ivory Coast is the logical location for a second plant; the country, the world’s largest grower, will produce 1.55 million tons of cocoa in 2014/2015. [Confectionery Production 29/12/14] Ghana Cocoa Board Intensifies Programs To Increase Productivity

The Ghana Cocoa Board [GCB] is intensifying its programs in the 2014-2015 cocoa season aimed at increasing productivity and making farming lucrative to attract and sustain youth interest. Programs include free distribution of improved hybrid cocoa seedlings, free spraying against diseases, distribution of free fertilizers and provision of basic needs of cocoa growing communities. The GCB has also initiated a cocoa rehabilitation and replanting program to assist farmers to rehabilitate and replant old, destroyed and abandoned cocoa farms. The Board plans to distribute 50 million seedlings during the 2014/2015 season and 2-million Cedis has been set aside to social intervention programs. [GBC 13/12/14] SATTIFS Project Boosting Production

The Centre for Innovation and Technology Dissemination [CITED] of the University of Energy and Natural Resources [UENR] is spearheading a project to boost cocoa and maize production. The project themed, “Strengthening Innovations and Technology for Sustainable Development in Value Chains in Western and Eastern Africa,” [SATTIFS] is on-going in Ghana, Uganda and Ethiopia. The project commenced in January 2014 and is expected to end in December 2016. It aims to build capacity in the sector by using innovations and technologies in increasing crop yield.

In Ghana the project is being implemented in over 20 communities in the Brong Ahafo and Ashanti Regions. SATTIFS is to establish a cocoa nursery in Goaso to train and distribute seedlings to farmers who were ready to plant newly improved variety of cocoa. As well as demonstrations and farmer field schools, to use some of the proven technologies in their farming enterprises. SATTIFS is run under the supervision of the Africa Caribbean Pacific-European Union [ACP-EU] Cooperation Programme. [GNA 14/12/14]

14 COMMODITY NEWS COCOA

US$450 Million For Cocoa Roads Rehabilitation

President John Dramani Mahama has announced a US$450-million package for the rehabilitation of roads in cocoa-growing areas. To be released in 3-installments of US$150 million annually, the funds would be used to finance selected roads in the Ashanti, Western, Eastern and Brong-Ahafo Regions, under the Cocoa Roads Rehabilitation Project being funded through the Ghana COCOBOD. [GNA 21/12/14] COCOBOD To Meet Target

COCOBOD is confident production levels of cocoa for this cocoa season will not fall below last seasons. The comments follows reports that Ghana could record a decline in its yields because most of the trees are over-aged. Ghana exceeded its cocoa target yield of 850,000 MT to produce 896,000 MT last season. The trend is for yields to fall after high yields. A late crop is expected going into January, February and March provided favourable rains. [Citi 97.3 FM 12/12/14] Nigeria Stakeholders Seek New Industry Deal And Regulator

Industry stakeholders noted Nigeria needs to develop large plantations that could make use of new technology systems, saying the industry needs funding if it is to compete favourably with those of other countries. Nigeria is yet to maximise its potentials in land mass, manpower and potential market to hold its own in the global cocoa industry. Ghana and Cote d’Ivoire boast of annual production of 700,000 MT and 1 million MT while Nigeria produces a mere 300,000 MT.

Speakers at a 1-day Nigerian Cocoa Investment Summit with the theme, ‘Reviving the Industry,’ was organised by the United States Agency for International Development [USAID] in conjunction with Nigerian Expanded Trade and Transport Programme [NEXTT]. The event noted that the need to encourage processing along the value chain was essential by developing the local market. Key recommendations agreed included the need to modernise farming on a large scale, using improved planting materials and effective management of post-harvest operations. The knowledge and capacity of farmers should be aggregated either through the creation of nucleus clusters or establishment of alliances such as the successful African Cashew Alliance. The Government is also to establish the Cocoa Corporation Board of Nigeria to regulate the industry and coordinate the efforts of all the players. The board will be public sector funded but private sector driven. An initial funding of US$10 million to kick start its operation will come from the World Bank. [Business Day 12/12/14] Output Target At Risk Due To Disease

The government target to produce 500,000 MT of cocoa in the 2014-2015 season is being threatened by outbreak of fungal blackpod disease. The devastating effect of the excessive rains last August and September is now telling on the overall tonnage of cocoa beans harvested according to the Cocoa Farmers Association [CFA]. Nigeria produced 350,000 MT in the 2013- 2014 season. Farmers in the southwest region that accounts for 66% of the country’s output are reporting the absence of the December cocoa harvest boom that usually supplies 35-40% of output lost to the heavy rains. The harvest in the region is expected to continue until the middle of January. Nigeria has 2-cocoa harvests include the main crop from October to December, and the smaller light crop from April to June. [Leadership 02/01/15] Farmgate Cocoa Prices Jump on Slow Harvest / Naira

Farm-gate cocoa prices have jumped as much as 20% since October as farmers slowed their harvest or sought more money for their crop as the country’s currency plunged. Prices in Nigeria’s southern cocoa belt currently range from N500,000 [US$2,824.70] to N520,000/MT compared with N430,000-450,000 in October as the main-crop harvest started. According to the Cocoa Exporters Association of Nigeria most exporters are holding forward contracts entered into when a dollar exchanged for N160. The central bank raised its benchmark interest rate to a record high of 13% on Nov. 25 and took the midpoint of its exchange rate to N168 from N155 per dollar, devaluing the currency as falling oil prices hit its mainstay crude exports. Nigeria is Africa’s biggest producer of oil, which accounts for 70% of government revenue and 95% of foreign-currency income. Nigeria produced 350,000 MT in the 2013-14 season. [Bloomberg 28/11/14]

15 Daily Spot Price [ICCO] These are the average of the quotations of the nearest three active futures trading months on NYSE Liffe Futures and Options and ICE Futures US at the time of London close.

Date ICCO daily price ICCO daily price London futures New York futures (SDRs/tonne) (US$/tonne) (£ sterling/tonne) (US$/tonne) 1 Dec 14 2011.77 2944.33 1908.33 2889.33 2 Dec 14 1987.16 2905.19 1894.33 2852.00 3 Dec 14 1993.30 2902.98 1886.00 2847.67 4 Dec 14 2004.33 2917.34 1895.67 2861.33 5 Dec 14 2016.67 2937.80 1919.33 2885.67 8 Dec 14 2028.24 2945.25 1919.33 2894.33 9 Dec 14 2047.59 2982.60 1934.33 2933.33 10 Dec 14 2033.11 2966.52 1925.00 2918.00 11 Dec 14 1977.54 2894.21 1874.00 2846.33 12 Dec 14 1982.96 2902.37 1879.67 2853.67 15 Dec 14 1994.55 2914.81 1896.67 2864.00 16 Dec 14 2008.55 2952.21 1915.00 2896.33 17 Dec 14 2015.71 2952.92 1922.33 2901.33 18 Dec 14 2054.44 2992.68 1945.00 2943.00 19 Dec 14 2067.99 3005.92 1959.67 2958.00 22 Dec 14 2071.77 3010.11 1961.67 2961.00

16 COMMODITY NEWS COFFEE

General Master Blenders Bid For Mondelez

D.E. Master Blenders 1753 BV faces an in-depth probe by European Union [EU] regulators over a US$5 billion bid to create the world’s second-biggest coffee company, rivaling Nestle SA. Combining Mondelez International Inc’s coffee unit with Master Blenders, owned by JAB Holding Co., the investment arm of the billionaire Reimann family, risks increasing prices by putting “key local brands in the hands of one company”. The EU set a May 6 deadline to rule on the deal. The move is the latest step from JAB to consolidate in coffee.

The company last year bought Master Blenders, the Amsterdam-based maker of Douwe Egberts, for US$9.3 billion, the industry’s biggest deal ever. Mondelez will gain a 49% stake in the new company, which will be named Jacobs Douwe Egberts and based in the Netherlands. Mondelez remains confident of closing the deal in 2015. The merged entity will have sales in excess of US$7 billion and be the market leader in countries such as France and Austria. The transaction excludes Mondelez’s coffee business in France and brings together brands such as Jacobs, Senseo, Tassimo, Carte Noir and Douwe Egberts.

Regulators cited concerns that the deal would reduce competition and increase prices. Nestle’s Nespresso and Dolce Gusto faces rivalry mainly from Master Blenders’ Senseo and Mondelez’ Tassimo. Master Blenders and Mondelez also compete against Nestle by selling capsules for Nespresso machines. The EU also flagged competition issues related to roast and ground coffee in France, Denmark and Latvia and for filter pads in France and Austria. According to regulators while the companies offered concessions to allay EU antitrust concerns, these were insufficient to remove potential problems. The EU may block deals, but more often seeks remedies from companies to remove overlaps that trigger antitrust issues. [Bloomberg 15/12/14] Cote d’Ivoire Farmers Paid US$1 Kg For 2014-15 Season

Ivory Coast will pay its coffee farmers a guaranteed price of 650 francs/kg [US$1.0] for the 2014/15 season, which starts in January, up from 620 CFA franc last season. The country forecast 2014/15 production at 106,000 tonnes, up slightly from 105,516 tonnes the previous year. Green robusta coffee output peaked at 380,000 tonnes in 2000. Production dipped below 100,000 tonnes in recent years after a decade of political turmoil that led to civil war in 2011. [Reuters 24/12/14]

17 Ethiopia Record Exports After Brazil’s Drought

Ethiopia expects coffee exports for its 2014/15 crop to hit a record high because of drought and disease stifling crops in Latin America. An unprecedented drought early this year reduced the 2014/15 crop in the world’s biggest coffee producer Brazil. The International Coffee Organization [ICO] forecast in September that global coffee production will fall short of demand.

In the 4-months from July this year, Ethiopia - Africa’s biggest producer of the bean - exported 54,000 tonnes of coffee worth US$231.9 million, compared with the US$172.5 million it earned from 51,000 tonnes over the same period last year.

The Ethiopian Coffee Exporters’ Association expects the amount of coffee exported to rise to 235,000 tonnes by the end of 2014/2015, generating US$862 million in revenue. Ethiopia exported around 190,000 tonnes in 2013/14, earning US$841 million. Exports hit a previous record high of 193,000 tonnes the year before. Total coffee production in Ethiopia amounted to 450,000 tonnes over the 2013/14 period. Officials expect a similar output by the end of 2014/15. [Reuters 04/12/14] Kenya Output To Rise 22% In Next 2-Crop Years

Kenya’s coffee output will rise 22% to about 60,000 tonnes in the next 2-crop years [Oct-Sept], thanks to new varieties and increasing area under cultivation. The aim is to raise production from about 49,000 tonnes in 2013/14, by introducing higher yielding coffee varieties and encouraging more farmers to take up the crop.

Kenya is a comparatively small coffee grower, producing less than 1% of world output in the 2013/14 crop year. But its speciality beans are renowned for their quality and are sought after by roasters for blending. Coffee exports were at one time Kenya’s leading foreign exchange earner, but poor management in the sector reduced output from a record 130,000 tonnes in 1987/88.

Government is now encouraging farmers, especially in western Kenya to start cultivating coffee, with an initial target of around 20,000 producers and is providing subsidised fertiliser to coffee farmers. [Reuters 18/12/14]

18 COMMODITY NEWS COFFEE

Tanzania 2014-15 Earnings Lag Last Season

Tanzania’s coffee export earnings for 2014/15 [May to April] have fallen behind last season. According to the Bank of Tanzania, earnings for the year to September fell by 33%, to US$127.7mn. Given the strength of international prices over this period - Arabica prices have risen by 57.6% since January - this indicates that volumes are significantly down. As rainfall has largely been good in the Arabica-growing north and Robusta-growing south, it is unclear what is causing the sluggish start to the 2014/15 season, which is already in its 5th month and which had a strong start; strong appetite from buyers for Arabica and Robusta beans almost sold out the season’s first auction. The latest export data are counter to expectations of the Tanzania Coffee Board [TCB] that 2014/15 production will rise by 27% to 61,800 MT, as the Arabica crop enters the ‘on’ year of its biennial production cycle. Prices at the auction fell by 6% to US$191/50-kg bag, in response to weaker demand resulting from the softening of international prices. [Bank of Tanzania 16/12/14] TANICA Prepares To Join DSE

The Tanganyika Instant Coffee Company Limited [TANICA] is in final stages to register on the Dar es Salaam Stock Exchange [DSE] through the Enterprise Growth Market-EGM. The move aims at giving TANICA more financial capability [2.5bn/-] by avoiding high interest rates charged by financial institutions. This will enable the purchase of new machines and raw materials on time. The exercise is expected to start in March 2015. TANICA collected over 6.2bn/- from 538,715kg sold between May last year to April 2014 [252,400 kgs instant / 286,315 kgs roasted]. Major local consumers include Serengeti Café and Africafe. Taniica has established supply centres in cities including Kampala [Uganda] and Dar es Salaam, Arusha, Mwanza and Bukoba. Annual production capacity is 500 tons of instant coffee but to-date actual production is 300 tons. Major export outlets include Italy, Jordan and Kenya. [Daily News 21/12/14] Uganda November Coffee Exports Down 17% Yr-Yr

Uganda’s coffee exports fell 17% to 219,948 60-kg bags in November compared with the same month a year ago. According to the Uganda Coffee Development Authority [UCDA] December exports will also fall to 240,000 bags from 257,976 bags shipped in the same month in 2013, with the drop attributed to a gradual peaking of the coffee harvest in central and eastern Uganda. Uganda earned US$29.5 million from coffee exports last month, up from US$26.7 million earned in same period last year. [Reuters 30/12/14] Exports To Slow Into January

Exports of coffee are expected to slow following heavy rainfall that has interrupted harvesting. According to the Uganda Coffee Development Authority [UCDA], the 2014/15 season started well, with October arrivals up 9% to 229,438 60-kg bags from the previous year, although this fell short of the UCDA’s forecast of 250,000 bags.

Export earnings over this period were also up by 35%, to US$30.7m owing to strengthening international prices and to producers and middlemen selling of stocks ahead of the holiday season. However, the UCDA expects coffee exports to fall by 1.5% in November, to 260,000 60-kg bags and for this weakness to continue into January. This has been caused by heavier than normal rains in the major Robusta producing regions in the centre and east of the country, which have delayed cherry drying and the transport of beans. However, the national coffee farmers’ organisation, Nucafe, continues to forecast a 4% increase in coffee arrivals to 3.7mn bags this year, as high-yielding trees planted five years ago under a government programme come into production. For its part, the UCDA expects outturn to be flat, at 3.5mn bags, on a par with the last two seasons. [Ecobank 18/12/14]

19 COMMODITY NEWS COTTON, TEXTILES & LEATHER GOODS

General WTO: African Cotton Producers Call For Level Playing Ground

Africa’s major cotton producers, Burkina Faso, Benin, Chad and Mali called on the World Trade Organization [WTO] to provide a level playing ground and rescue them from recent price falls.calling for a swift conclusion to negotiations to slash policies that distort markets. The call was made at a meeting on cotton development assistance ahead of separate WTO agriculture negotiations also focusing on cotton.

Known as the Cotton-4 the group appreciated assistance received from international donors, including South-South cooperation from Brazil, China and India. But they also expressed concern about the falling prices, which the International Cotton Advisory Committee [ICAC] is forecasting “optimistically” to stay at current low levels, and how to compete effectively in world markets whilst yields remain static yet those of other countries such as India - now the world’s largest cotton producer - continue to rise. Some other countries, such as China, Argentina, India, Nigeria and Brazil, supported their call for countries to avoid subsidizing cotton producers when prices fall, and for a quick conclusion on negotiations that aim to make steep cuts in domestic support, tariffs and export subsidies on cotton. [NBE 02/12/14]

Benin Lowers Cotton Farmgate Price

Benin has lowered the cotton farmgate price for the 2014/15 season, prompting anger from cotton farmers. The government, which took over management of the sector in 2012, lowered the fixed price from XOF265/kg in 2013/14 to XOF250/kg in the new marketing season, arguing that prices had to fall to reflect the 25% drop in international cotton prices this year. But the move has angered producers who fear that the lower price will prevent them from paying off the debts from input purchases.

Although the government-owned SONAPRA has been distributing inputs on credit this season, some producers have complained that the insecticides have been of poor quality, which has forced them to import additional insecticide from Ghana. Ultimately Benin’s producer price for 2014/15 remains overvalued compared to the region’s largest producers, Burkina Faso and Mali, which are both purchasing first-grade seed cotton at XOF235/kg. With the current international price averaging just 68.6 US cents/lb, this will put huge strain on Benin’s government as it struggles to pay farmers an above-market price. [Ecobank 20/12/14]

20 COMMODITY NEWS COTTON, TEXTILES & LEATHER GOODS

Mali Mali Revises Down Forecast For 2014-15

Mali, Africa’s 2nd largest cotton producer, has revised down its 2014/15 forecast for cotton production following inconsistent rainfall. According to the state-owned Compagnie Malienne pour le Développement du Textile [CMDT], seed cotton output is forecast to reach 545,000 MT, 10% below its target of 600,000 MT. The downgrade has resulted from uneven rainfall, notably excessive rains which caused damage to sown acreage, and a 5% drop in the area planted to 539,650 ha. Nonetheless, the latest forecast still represents a 36% increase over last season’s outturn of 400,000 MT, which was largely the result of the lack of sufficient rain. This season abundant rainfall in the Northeast [Koutiala] and South [Sikasso] zones, which together produce over 70% of Mali’s cotton, has boosted production of seed cotton. This has forced CMDT in Koutiala to start ginning ahead of schedule in mid-October, rather than in late November, in order to avoid seed cotton stocks piling up and causing congestion at factories.

Given that rains have persisted into the traditional dry season in the Northeast and South, CMDT is also keen to minimise any damage to seed cotton quality at the farmgate. Low humidity levels, which need to range between 7% and 8%, are critical to achieving good cotton fibre yields [typically 42% in Mali] and to avoiding any damage to the cotton gins.

CMDT has also taken strides to rectify lingering quality issues that have dogged its cotton fibre— which accounts for up to 90% of the commercial value of seed cotton. Mali has struggled with high contamination levels in its seed cotton resulting from producers re-using plastic fertiliser bags for the harvest, which leaves traces of plastic in the cotton fibre and results in its trading at a discount to spinners. In an effort to address this problem, CMDT has replaced plastic bags with coloured polyethylene bags and has started helping cooperatives grade seed cotton at the farmgate, which is boosting the reputation of Malian cotton among other West African origins. [Ecobank 20/12/14]

21 Tanzania Tanzania Cotton Revival Plan

Tanzania receives between US$90-100 million from cotton sales annually despite hurdles facing the sector. According to the Tanzania Cotton Board [TCB] challenges include seed prices and poor seed germination. Cotton is grown in 15 regions across 2-zones: the Western zone includes Mwanza, Shinyanga, Simiyu, Geita, Tabora, Mara, Kigoma, Singida and Kagera, while the Eastern zone covers Morogoro, Iringa, Coast, Tanga, Kilimanjaro and Manyara.

A cotton revival plan is underway aimed at enhancing productivity levels that at one time saw Tanzania ranked in the list of major producing countries in Africa only to register a drastic decline in recent years. Whereas production was 350,000 tons in 2011/12 it dropped to 246 tons in 2012/13, slumping further to 201 tonnes in the following year. The poor performance has prompted the government to intervene with institutional and policy changes. Through a new contract farming initiative, Farmers Business Groups [FBGs] operate as cotton sale centres abolishing the system of using cotton agents by the ginners. The move should not only ensure better seeds but also high quality yields and better income as cheating through weighing scales will no longer apply. For the coming 2014/2015 season Tanzania is expected to earn more as planting will cover 400,000 ha with an average 300 kg per hectare yield.

Since liberalisation in the 1990s there has been increased capacity in cotton farming and ginning with the number of ginneries increasing from 36 in 1993 to 56 ginneries now. The number of cotton buyers has also increased to about 35 companies. Buying had previously been handled by a handful of regional cooperative unions. TCB expects around 400,000 ha to be sown with cotton this season whereas 16,892 tons of fuzzy seeds and 1,192 tons of delinted seeds will be distributed and planted up to the end of the sowing period. The board has fixed prices at 500/- per kilogram for fuzzy cotton seeds and 1,600/- per kilogram of delinted seed. Price levels were explained by the high demand for clean seeds for oil milling purposes, which could jeopardise availability of seeds for planting if the price was to be fixed at 300/- per kg. The price for clean seeds for oil making goes at 500/- per kg. There are no cotton seed production farms in the country, with the sector depending entirely on seed cotton produced by farmers to get seeds for planting in the subsequent sectors.

The Cotton and Textile Development programme [CTDP] is an initiative funded by the Tanzania Gatsby Trust [TGT] and the UK’s Department for International Development [DfID]. The CTDP works under the auspices of the Tanzania Cotton Board [TCB] and with a wide range of public and private sector partners to improve the incomes of 360,000 small scale cotton farmers in the Lake Zone regions – aiming to sustainably transform the industry. The move includes major policy work on cotton pricing, licensing and regulation; the development of private markets for key agricultural-inputs; and the facilitation of sector-wide use of improved cotton seed. In parallel to this market transformation, the Programme is encouraging cotton farmers to adopt minimum tillage conservation agriculture. [EA Business Week 21/12/14 & Daily News 19/12/14] Regional Cotton Centre In Pipeline

Tanzania and Brazil are finalising the establishment of a US$6 million regional cotton centre at Ukiriguru in Mwanza Region to improve seedling and train farmers on better farming technology to enhance productivity and quality of cotton. The deal is expected to be signed in June 2015. Other countries that will be served by the centre include Kenya and Burundi to begin with and later Uganda, Democratic Republic of Congo [DRC], Zambia and South Sudan. [Daily News 27/11/14]

22 COMMODITY NEWS COTTON, TEXTILES & LEATHER GOODS

Uganda 2014-15 Cotton Output Seen Climbing On Global Prices

Cotton production in Uganda, East Africa’s second-biggest grower, may climb 80% in 2014-15 as stable global prices and improved weather boost planting. Output is expected to rise to 140,000 185-kg bales of lint in the production year through September 2015 from 78,000 bales in the previous season according to Uganda’s Cotton Development Organisation [UCDO]. Lint production last season fell from more than 102,000 bales in 2012-13 after floods destroyed the crop in western Uganda and a drought cut yields in other areas. Uganda, which grows the medium-long fiber variety of cotton, plants the crop from June through August and reaps it between December and February. The country’s highest production since the regulator’s founding in 1994 was 254,000 bales in 2011-12. Uganda exports at least 95% of its lint, mainly to neighboring Kenya and to Asia. The country is the region’s biggest grower of the crop in the East African Community [EAC] after Tanzania. [Bloomberg 18/12/14]

Zambia 2013-14 Cotton Output Falls

Cotton production in Zambia fell in 2013/14, reversing the sector’s recent resurgence. According to the Zambia Cotton Ginners Association [ZCGA], seed cotton output fell by 7%, to 95,000 MT, owing to low yields [on average 300 kg/ha], lack of inputs and high production costs. Low cotton seed productivity leads to low outturn of cotton fibre with Zambia’s cotton sector averaging as little as 142kg/ha, using the industry standard of a 42% ginning yield. Coupled with the fierce competition for seed cotton between ginners, this has undermined the viability of Zambia’s ginning sector, undermining their ability to pre-finance inputs to producers through contract farming schemes. The poor international price environment is a further constraint on production this season, as more Zambian cotton farmers are expected to abandon cotton in favour of other more lucrative crops. [Ecobank 20/12/14]

23 COMMODITY NEWS FISH

Mauritania Senegal Granted Fishing Licences

Mauritania has agreed a 33% rise in fishing licences to Senegal increasing the number of trawlers from its neighbour allowed to ply its waters to 400. The year-long deal allows Senegalese crews to capture 50,000 tonnes of which 12 tonnes must remain in Mauritania. A “symbolic” fee for the deal was around US$925,000, a third of which will be paid by the Senegalese government and the rest by the fishing crews. The contract commits both sides to cooperate on training, scientific research and maritime surveillance. [New Age 05/12/14] Mozambique IFAD Finances Agriculture And Artisanal Fisheries

The International Fund for Agricultural Development [IFAD] has granted over US$46 million to Mozambique this year for fisheries and agriculture. The money is part of US$213 million to be paid by IFAD by 2020. The government of Mozambique and IFAD met in Maputo to analyse the use of funds in 7-projects that are currently underway. Agricultural projects are being carried out in northern Mozambique, in Zambezia and Limpopo while those linked to promotion of artisanal fisheries are located in the provinces of Cabo Delgado, Maputo, Sofala and Manica. [Macauhub/MZ 18/12/14] US$6.2 Million For Aquaculture Development

The Nordic Development Fund [NDF], a joint development finance institution of 5-Nordic countries, has approved a US$6.2 million grant for sustainable growth of aquaculture in Mozambique. The grant will assist Mozambique to pilot and develop a sustainable aquaculture model to build social, economic and environmental coordination and disseminate best practices in the region through private sector involvement. Aquaculture is projected to increase substantially in Africa during the next decades. [African Farming 19/12/14] Namibia Hong Kong Halts Oyster Imports After Detects Cadmium

The Centre for Food Safety in Hong Kong has suspended imports of live oysters from Walvis Bay port after laboratory tests detected a high percentage of cadmium in oyster samples which exceeded the legal limit. Cadmium is frequently used in the manufacture of nickel-cadmium rechargeable batteries and longer exposure can adversely impact on kidneys and bones. Namibia has a small but well-established oyster industry exporting thousands of live oysters to South Africa and Asian markets, where they are regarded as a delicacy. [Reuters 26/12/14]

24 COMMODITY NEWS FOODSTUFFS & FLOWERS

Mali Exports Over 37 Million Tons Of Mangos

Mali’s mango exports in 2014 reached 37,572,771 tons. Total mango production reached about 200,000 tons of which a quarter are grafted varieties [Zill, Irwin, Amélie, Smith, Kent, Palmer, Keith et Brooks] and the rest non grafted [notably Sabre, Mangotine and Mango vert varieties]. Production is found on small farms near Bamako or Sikasso. Bakary Togola. The President of Apcam, noted packaging adds 50% value to the product and needs improvement. [Fresh Plaza 05/12/14] Namibia More Control On Livestock Exports To South Africa

As a result of the recent restriction of livestock exports from Namibia to South Africa by the South African veterinary services, the Meat Board has sharpened its export permit system. The Meat Board decided that all commercial livestock from Namibia may only be exported to specific destinations in South Africa. These destinations were compiled in cooperation with Namibian and South African role players, exporters and importers. This regulation will come into effect on 1st February 2015. [Namibian 25/11/14] Senegal Mango Industry Receives Export Boost

With support from ITC, Senegal has launched a project to boost the productivity, processing capacity, and export market diversification of its mango industry.

The project is Senegal’s first ‘tier 2’ project under the Enhanced Integrated Framework [EIF], a multi-agency initiative aimed at helping developing countries use trade to drive growth and development. ITC worked closely with Senegal’s National Implementation Unit for the EIF, as well as the Senegalese Agency for Export Promotion [ASEPEX] and other partner institutions. With nearly 15,000 tons exported, Senegal ranks #2 in West Africa. There is still potential for greater value addition and better marketing. In addition to the excellent quality of Senegalese mangoes, the country has a long export season and an optimal location: its main market, the European Union, is only 6-days away by sea. The mango market has registered average annual growth of 8% since 2008. [International Trade Center 03/12/14]

25 South Africa Apples Gain Access To Chinese Market

After years of negotiation and dealing with technical issues, the South African Apple and Pear Producers’ Association [SAAPPA] announced that the Apple Export Protocol to enable apple exports to China, has been approved and signed. The protocol was signed by the Minister of Agriculture, Senzeni Zokwana and the Minister AQSIQ: Zhi Shuping during the current state visit to the People’s Republic of China in Beijing on 4 December. This culminates an 8-year process and will enable the SA industry to expand its marketing footprint. After a successful verification visit of Chinese quarantine [AQSIQ] officials earlier in 2014, the industry has prepared the required orchard and export registration lists which could be provided to AQSIQ as soon as it is requested. Once the Chinese quarantine officials have approved and signed off on this list, exports could commence immediately.

Tapping into this market has been a major priority in the industry for more than a decade and should act as a springboard to also more effectively access other markets in Asia. Apples are currently exported to 8 primary destinations including; Africa, the Far East and Asia, the United Kingdom, the Middle East, Continental Europe [including Russia] and smaller volumes to the Indian Ocean Islands, the USA and Canada. Further market access will support further growth, economic development and enhance land reform transformation and new plantings. South African pears and stone fruits are expected to follow. [Fresh Plaza 04/12/14]

US Chicken Trade

Two United States senators want to block South Africa from a U.S.-Africa trade agreement if Pretoria doesn’t lift import duties on cheaper cuts of chicken. South Africa has imposed “anti-dumping” tariffs since 2000 of above 100% on certain products derived from the chicken carcass. These parts [heads and feet] are not popular in America and U.S. exporters could easily undercut local producers without the duties. Senators Chris Coons and Johnny Isakson addressed President Zuma that they need to reconsider the extension of duty preferences under AGOA for South Africa if this situation is not resolved, referring to the African Growth and Opportunity Act which regulates U.S.-Africa trade. Under the AGOA, which is up for renewal in late 2015, as much as 90% of South Africa’s exports enter the United States duty-free. South Africa Trade Minister Rob Davies said the two countries were discussing a possible deal whereby the U.S. could export a capped volume of chicken in return for providing assistance with developing trade links. Despite duties, U.S. chicken exports to South Africa totalled US$20.1 million in 2013. The market is growing 8.5% a year. [Reuters 12/12/14]

26 COMMODITY NEWS PALM OIL & EDIBLE OILS

General EU Labelling Changes Force Industry Action On Palm Oil

Since 13th December, 500 million consumers in Europe became aware that palm oil is in their food. The EU law on food information to consumers [otherwise known as FIC] means that food stuffs can no longer get away with hiding ingredients under generic titles. Now ingredients will have to be exactly what it says on the tin, and sustainable palm oil could be a major beneficiary. Until now, palm oil has often been hidden as generic vegetable oil, as well as hundreds of other misleading synonyms. Transparent labelling is already having a positive impact on the uptake of sustainable palm oil, certified by the Roundtable for Sustainable Palm Oil [RSPO].

In the first two-quarters of this year compared with last year there has been a 65% increase in sales of certified sustainable palm oil [CSPO]. However, whether FIC will boost the long-term uptake of CSPO is uncertain. The regulation only requires that palm oil is stated where used, not whether it is sustainable or not. Currently 17% of global palm oil production is RSPO-certified, and only 52% of that finds an end buyer. In countries such as France, Belgium and Sweden, public concern over the use of palm oil is high, both from a sustainability and health point of view. [All Africa 12/12/14] Unilever’s Journey To 100% Sustainable Palm Oil

Unilever will be able to trace all the palm oil sourced for its European foods business to certified plantations by the end of 2014, as part of its commitment to a transparent and sustainable supply chain. Knowing the origin of palm oil is vital to halt deforestation. Through its traceability efforts, Unilever now has visibility of around 1,800 crude palm oil mills, around 66% of all mills in the global palm oil industry. Around 58% of the global volume of palm oil is now traceable to known sources. Unilever, which purchases around 1.5m tonnes of palm oil and its derivatives annually, is working to drive transformation within the palm oil market and see the entire industry move to 100% sustainable palm oil.

Find out more in the Unilever Sustainable Palm Oil Progress Report 2014 http://www-stage.unilever.com/ images/uslp-Unilever-Palm-Oil-Report-Nov14_tcm13-402644.pdf Cote d’Ivoire DekelOil Ramps Up Production At Ayenouan Palm Project

DekelOil Public Ltd outlined plans to increase its crude palm oil production in Côte d’Ivoire by building a series of mills around its production mill at Ayenouan to facilitate collection of higher quantities of fruit. Two hubs are now fully operational, with a third expected to be operational in February 2015 in time for March when the next peak season commences and a fourth set to be established in by March 2015. The company is targeting production of 70,000 tonnes of crude palm oil per year at the mill. Combined with an expanded truck fleet a significant increase in crude palm oil production volumes should be realised. [Alliance News 02/12/14]

27 DRC Feronia Leading The Shift In ‘Palm Oil Power’ To DRC

The Feronia Group has the opportunity to put the DR Congo on the global palm oil map: attracting investment from areas where palm oil is on the decline such as Malaysia, Indonesia - or from China itself. Feronia Inc. owns and runs agricultural plantations in the Democratic Republic of Congo [DRC] which offers an ideal climate, rich soil and experienced and highly skilled labor force.

Feronia is to build a new facility at the Yaligimba plantation in the equatorial region as well as boosting production to Basongo-Mapungu [formerly Brabanta] in the Western Kasai. In November, Feronia signing a new agreement with the 6-unions representing 3,600 company employees for immediate and long term benefits.

Feronia employs experienced farmers, who have direct experience in the management of plantations as well as how to run mechanized farms in emerging markets and it has hedged any risks by emphasizing environmental protection, community support and sustainable agriculture. In 2009 it acquired the Plantations et Huileries du Congo SA [PHC] from Unilever.

Over the 5-years of its ownership, Feronia has concentrated on repairing infrastructure and reclaiming the plantations after years of under-investment and disruption caused by the war.

Feronia’s goal is to make the DRC into an ‘African Brazil’, in other words an agricultural powerhouse. In 2012 the African Agriculture Fund pledged €8 million to support the rehabilitation of farms. Furthermore their research department has developed palm breeds that are twice as productive.

The palm oil market has grown considerably in the last 2-decades; China and India have generated considerable demand, which has led to a significant increase in prices.

Palm oil is likely to face competition from other products oilseeds such as soybean oil but, for the foreseeable future, it is the only fat that can be obtained in large quantities in the equatorial regions. As living standards rise in Africa and other developing regions, and the rise of the middle classes in the two traditional palm oil powers, Malaysia and Indonesia, there will be a shift in ‘palm oil power’. [Investor Intel 04/12/14] Gabon DekelOil Secures Palm Oil Sales Deal With Gabon Conglomerate

DekelOil Public Ltd has signed a supply deal with agro-industrial conglomerate Société d’Investissement pour l’Agriculture Tropicale to sell its crude palm oil.

DekelOil will sell the oil to the Gabon-based company at a 10% premium to the cost, insurance and freight Rotterdam price at the time of sale. The company now has 4-sales partners in place, and the new deal with SIAT is its first sales for export. Two shipments have been successfully completed under the new deal. [All Africa 10/12/14]

28 COMMODITY NEWS PALM OIL & EDIBLE OILS

Nigeria Towards Self-Sufficiency In Crude Palm Oil Production

For Nigeria to meet the shortfall in local usage of crude palm oil and to be self-sufficient, it needs a total plantation of 300,000ha of land. This no doubt is huge and requires the support of government through its ministry of agriculture by providing suitable and adequate land for willing investors to invest in large estate plantations. This would also require a minimum of 20 years of palm tree planting at a very large scale. The civil war destroyed almost all of the plantations and dispersed the small land holders of oil palm, who accounts for 80% of oil palm produced locally.

Palm oil produced totalled 930,000MT in 2014 with local consumption amounting to 2 million MT p.a. The official shortage is estimated to be around 900,000MT annually. If this shortage is not filled with importation of high quality food grade palm oil, the economy will lose investment in the manufacturing sector as companies are likely to relocate outside the country. However some industries have proactively announced strategic alliances to invest in oil palm plantations. Analysts estimate that the major importers of crude palm oil [CPO]); Nigeria and Benin import 450,000MT and 470,000MT p.a with claims that most of Benin’s CPO imports finding their way into Nigeria through informal channels as Benin exports 390,000MT p.a. Thus, actual shortage of CPO could be as high as 940,000MT if the exports from Benin Republic are taken into consideration.

The majority of companies operate in Nigeria import from the ECOWAS states at zero duty. The level of production in the ECOWAS states is not high enough to support the quantity of CPO imported in those states, but rather, some companies are importing through the ECOWAS states and bringing it in through informal channels without paying any duty to government. More than 50% of total import in Nigeria is from ECOWAS at zero duty. These are areas that the government must turn its search light on to ensure all imported CPO pass through the right channel and the payment of the 35% duty is paid to increase government revenue.

Importation from ECOWAS into Nigeria has not only eradicated the option of receiving revenue through duty, but has also curtailed the economic growth with less investments coming into Nigeria to develop the palm oil sector. Having been at the forefront of palm oil production, Nigeria today is losing investments worth billions of naira as parallel market imports from Benin and official imports from ECOWAS has removed the sheen from the investment opportunities in the country. [Business Day 31/12/14] Zero Duty Threatens Local Industry

The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture [NACCIMA] has called on the Government to reconsider the ECOWAS CET document and revise the tariff on other palm oil products in line with others.

“The implication of not indicating the duty payable for implies zero duty, consequently if this omission is allowed to stand, it would lead to flooding of the market with these products through our neighboring countries of Ivory Coast, Ghana, Kotonou and Togo where they are mostly dumped, thereby killing the market for locally produced palm oil products.” - NACCIMA [Vanguard 22/12/14] PZ Wilmar Invests US$650 Million In Oil Palm Estates

Efforts by Nigeria to reclaim its lost #1 spot as producer and exporter of palm oil and produce, lost to Malaysia when crude oil was discovered, may soon be realised. A joint venture [JV] between PZ Cussons and Wilmar International Limited are working in collaboration with the Cross River State government to plant 26,000 ha with high yielding palm fruit nuts. The JV acquired the 4-estates which were previously State-owned and abandoned for years. PZ Wilmar is investing US$650 million. The company also wants the government to extend the’ backward integration initiative’ which it introduced in the cement, sugar, rice and other agricultural sectors to the palm oil sector.

Currently Nigeria actually imports more than 350,000t/yr. The company which already has a modern refinery in Lagos State where they produce cooking oil brand, Mamador, and also carry out local production of Devon King’s brand noted they are forced to import the main raw material, crude palm oil, from other countries including some West African countries, pay high clearing fees plus other charges whereas more than enough of their crude palm oil needs could be produced in the country and much more for export.

Global market demand for palm oil is around 50m tonnes and some estimates predict that this will double by 2020. More oil palm is needed to meet this demand which gives Nigeria a great opportunity to be leaders in sustainable palm oil development. [The Nation 06/12/14]

29 COMMODITY NEWS SUGAR

General Illovo Seeks African Trade Deals

Illovo Sugar has set its eyes on East and West Africa for growth as it prepares its exit from EU markets in the medium to long term. Similar to the world market, EU sugar prices have continued to deteriorate as industry producers repositioned themselves for the 2017 sugar reform which will see the EU move from being a net importer of sugar to a net exporter. In Africa, Illovo is looking at growing its footprint in Kenya, Ethiopia and West Africa. The company already operates in Malawi, Zimbabwe, Tanzania, Swaziland and Mozambique.

For the 6-months to September, Illovo’s revenue declined by 5% to R5.9 billion as a result of a 9% drop in sugar production and reduced export market prices. The group’s operating profits fell 14% to R1.3bn. Profits were down due to a fall in total sugar cane and sugar production, as well as the decline in EU market prices. Variable weather conditions and industrial action in Swaziland and South Africa affected Illovo’s performance. Yet operations in Zambia and Mozambique are expected to achieve record sugar and cane production for the year. Illovo’s throughput amounted to 10.7 million tons - a 11% decrease compared with the period last year. The season had been affected by variable conditions such as later summer rainfall and a very dry winter accompanied by frost damage in South Africa. Cane production in Swaziland was affected by an industry strike and climate factors. Meanwhile Zambia produced record production at its Nakambala factory and operational improvements in Mozambique should also result in record cane and sugar production. [Business Report 02/12/14]

30 COMMODITY NEWS SUGAR

Kenya Sector Faces Test As MP’s Debate Sale Of Millers

Kenya remains unprepared for the launch of the free trade area. Parliament has failed to pass a motion to pave way for privatisation of 5-sugar companies jeopardising plans to beat the deadline for the Common Market for Eastern and Southern Africa [COMESA] sugar safeguards. The safeguard period expires on February 28, 2015, meaning Kenya will not have sold the millers by then as Parliament reopens in February 2015. Analysts say this would see cheap sugar imports compete with the local sugar products.

Last month, the House Committee on Trade approved the plan to sell a 51% stake in the Miwani, Muhoroni, Nzoia, Sony and Chemelil millers to strategic investors. The Treasury projects receipts of Sh40 billion to rehabilitate and modernise the companies to enhance their competitiveness. The new bill proposes the sale of 30% to farmers through a Trust. A 3-year moratorium is also proposed, whereby farmers have 3-years to pay for the shares set aside for them. The privatisation process will see the Government write off more than Sh39 billion debts that were approved by Parliament in January 2013. [Standard Digital 18/12/14] Industry To Cut Costs Before Safeguards Removed

Producers need to slash costs and diversify into products like ethanol to make the industry more competitive before import safeguards are removed next year. The government wants the industry to move away from being a high-cost, single-commodity supplier to a self-sufficient competitive, multiproduct industry to help diversify its revenue stream.

In February Kenya was given a 1-year extension to fully open up the sugar trade to the Common Market for Eastern and Southern Africa [COMESA]. The nation enforces a quota on the amount of sugar that can be imported duty-free from COMESA, helping protect its farmers whose cost of production of at least US$570/MT is more than twice as much as Egypt.

The government is urging the adoption of other measures such as setting performance standards for millers, using more advanced technology to process the sweetener and paying farmers based on quality and not just weight. The state can also contribute by boosting infrastructure to reduce post-harvest losses and cut shipment times, as well as supply affordable credit and subsidized fertilizer.

Sugar production accounts for 15% of total agriculture output or 20% of GDP. Output is forecast to climb 6% to 636,956 MT in 2014 compared with 2013. Production outlook was cut from 698,351 MT after at least 4-sugar-processing factories temporarily stopped operating since October. Seven mills that are still working produced out a daily average of 1,344 tons of sugar against a demand of 2,000 tons. The gap is filled with regional imports. Kenya produced 475,708 MT in the 9-months through September compared with 438,713 MT the same period last year, according to Kenya National Bureau of Statistics. [Bloomberg 16/12/14] Sharp Drop In Sugar Imports

Kenya imported 129,225 MT of sugar from January to November, compared with 219,522 MT in the same period in 2013, a 60% drop. Kenya is obligated to allow importation of up to 350,000 MT of sugar duty free from partner states. Any sugar imports above this quantity are subjected to a 5% duty. Kenya is yet to exceed the above stated quantity. Kenya is currently producing 70% of the total domestic sugar requirement, making the country a net importer of the commodity. Total sugar requirement in the country is approximately 800,000 MT, consisting of 650,000 MT of table sugar and 150,000 MT for industrial use.

The gap in local production is supplemented through imported sugar mainly from COMESA and the East African Community [EAC] markets and refined sugar from non-COMESA/EAC markets. Kenya, as a member of the EAC Customs Union, is under an obligation to allow quota and duty free access of sugar and other commodities from partner states taking into account domestic needs. Kenya has a cap on sugar imports at 350,000 MT to protect local millers from competition. It produces about 600,000 tonnes a year.

The government does not license imports it simply facilitates traders through its agency. A robust strategy is under implementation to insulate the market against unfair trade practices due to grave impact and serious risks that illegal sugar importation threatens generally to the national economy and specifically to the sugar industry. [Global Post 12/12/14]

31 South Africa Illovo Sugar H1 Earnings Fall 10%

South Africa’s Illovo Sugar reported a 10% decline in H1 earnings due to lower sugar production and depressed global prices. Sugar production was hit by bad weather conditions and a strike resulting in total sugar production falling by 9% to 1.3 million tons. Illovo noted the decline was partially offset by higher demand in its domestic market, a weaker rand and cost-cuts. South Africa’s revenues service raised sugar import tariffs after months of lobbying by producers who argued that the international price of the commodity was lower than production costs and that cheap imports were strangling business. Illovo said earnings in South Africa were eroded by prior season sugar imports which were not subject to the tariff increase but that full-year revenue will benefit from the protection. [Reuters 01/12/14] Tanzania Review Of Sugar Import Permits

In the face of mounting controversy over illegal sugar imports, the government has announced plans to review all sugar importation permits, including issuance formalities. The government has also expressed commitment to ensure sugar producers do not make good on their threat to down tools. The planned review will be conducted by the Trade, Finance and Agriculture ministries. Government will check if any procedures have been violated and deal with all dishonest dealers and smugglers. The development comes in the wake of a recent threat by local producers to halt production to pressure the government to act on the flooding of untaxed and smuggled cheaper imports. Tanzania Sugar Producers Association [TSPA] noted producers are not against importation or particular importers, but wanted an effective and transparent process. [Guardian 09/12/14]

US$550 Million Sugar Project

The Bagamoyo EcoEnergy Ltd, a special purpose company under Agro EcoEnergy [T] Ltd, is seeking to implement a US$550 million project involving the production of sugar and ethanol and the generation of electricity to sell to the Tanzania Electric Supply Company [Tanesco]. When operating at full capacity, the plant will produce an estimated 130,000 MT/yr for the domestic market. Currently credit facilities from financial institutions are a stumbling block on account of the fluid state of the industry. [Guardian 09/12/14]

32 COMMODITY NEWS TEA

Kenya Government To Audit Tea Sector Value Chain

The government is set to audit the tea value chain to promote sector growth. Value chain analysis will help the country identify its competitive edge to drive the sector. The Kenya Tea Development Agency [KTDA] held a Directors Conference urging the government to look into issues affecting the industry that include cost of doing business - namely high sector taxes at auction level that make tea exports more expensive than Rwanda, Tanzania Uganda and Malawi. As well as high labour cost, taxes, and escalating cost of production largely as a result of high energy costs.

The industry have been calling on the Government to waive ad valorem levy of one per cent introduced in 2012 to fund research and marketing for the country’s top income earner. East African Tea Trade Association, the body that manages the Mombasa auction wants the 1% ad valorem levy reduced to 0.25%, which is proportionate to the recommendations of the 2007 tea industry task force.

KTDA also urged the government to negotiate on new market ventures that include Russia, China Iran and Turkey among others. The industry also needs to diversifying into new products among them Green Tea and Orthodox Tea other than the Black CTC tea to counter the global fall in tea prices owing to over production.

The announcement comes 2-months after 600,000 KTDA tea farmers received reduced final bonuses - reduced by Sh15.8 billion owing to a sharp drop in international prices, bringing the pay to a 6-year low. The farmers were paid a total bonus of Sh19.8 billion, a 44.3% drop on the Sh35.6 billion paid last year. The total earnings for KTDA decreased from Sh69.2 billion last year to Sh52.9 billion in the year under review, representing a 23% ecline. Favourable weather conditions in 2013-14 led to an oversupply of tea triggering reduction in prices. KTDA posted Sh35.5 billion in farmer’s earnings for the 2013/2014 financial year down from Sh51.3 billion farmers earned in 2012/2013 financial year. [Capital FM 03/12/14 & SD 05/12/14] Government Releases Ksh442 Million Input Subsidy

The Government has released a 442 million shillings input subsidy to tea farmers to cushion them against the high cost of fertilizers. Tea farmers who bought fertilizers for last year’s crop are expected to get a refund for their December crop payments to be made in January. The government is also expected to push the subsidies further down to 70% bringing it to the same level with rival production countries like India and Sri Lanka. The tea farmers are set to receive a 321.35 shillings refund for every 50-kg bag of fertilizer bought following a move by the government to subsidize input in the tea sector. Eleven tea factories are expected to venture into the production of orthodox teas in the coming year as a way of averting shocks in the market for the traditional black teas. However, the Kenya Union of Small scale Tea Growers Organization has been urging farmers to boycott tea picking saying the Kenya Tea Development agency [KTDA] has been charging too much for their crop management resulting in low bonus payouts. [KBC 31/12/14]

33 Companies Issue Profit Warnings

The weak market and depressed tea prices saw tea firms issue profit warnings for the second half of 2014.

Williamson Tea Kenya and Kapchorua Tea Company issued a 25% drop profit warning for H1 2014 compared to H1 2013. Both firms attribute the warning to the favourable weather conditions that will see the crop and stock levels continue to rise depressing the tea prices further as well as the global tea market that has no indication of picking up in the near future. The firms raised concerns over the rising cost of doing business as consensus is yet to be reached with the labour unions on the 2014 and 2015 wage rates. Kapchorua Tea posted 38% drop in H1 2014 net profit to Sh47.7 million from Sh76.9 million in H1 2013 while Williamson Tea posted a 54% drop in H1 net profit to Sh168.2 million from Sh368.2 million shillings. Kenyan producer Sasini announced its pretax profit fell 61% to 61.8 million shillings [US$683,250] in the year ended Sep. 30, hurt by falling tea prices and lower coffee production. Total revenue fell slightly to 2.76 billion shillings from 2.82 billion shillings. [Business Recorder 21/12/14 / Capital FM 03/12/14] Sacco To Raise Sh500 Million In New Share Float

Chai Savings and Cooperative Society [Sacco] is set to float shares to its members with a view of raising Sh500 million to finance its growth plan. The Sacco, registered in 1973 to offer financial services to the Kenya Tea Development Agency [KTDA] workers, has embarked on a 5-year [2014-2018] strategic plan with hopes of improving its visibility. A share offer priced at Sh20 a piece will be sold to members only. The proceeds would be channeled towards opening new outlets and marketing offices in strategic locations mainly tea growing zones. The Sacco aims to increase membership from 9,000 to 40,000 by 2018, grow its assets from Sh1.5 billion to Sh6 billion, increase branches from 3 to 9 and to open up 25 marketing offices. [Standard Digital 13/12/14] Prices Hit Rock Bottom As Production Peaks

Average auction prices for tea dipped to a historical low of US$2.01/kg in September [Sh178.32]. This means the country’s total earnings from tea exports are set to drop further this year, even as local production and quantity shipped out increase for the 3rd consecutive year. Data from the Tea Directorate shows Kenya has exported 338,948.1 tonnes of tea in the first 9-months - an all-time high compared to similar periods in the past. Exports were at their lowest in 2012 but recorded the highest auction prices ever at US$3.42/kg in July and August. Total earnings from tea exports through to September amount to Sh70.58 billion, according to the Kenya Revenue Authority [KRA], which is a 9.6% decline from the Sh78.11 billion earned over a similar period last year from exports of 330,716 tonnes. The average auction price in the 9-months is US$2.22/kg with the price remaining below US$3/kg for more than 19 months. [The Star 04/12/14]

34 COMMODITY NEWS TIMBER

General Tightening log availability in SE Asia boosts prospects

Log supply in West and Central Africa is currently matched very closely with demand levels so the on-set of the rain season in Cameroon and Gabon will disrupt harvesting and the supply/demand balance. However, producers in West and Central Africa note that log supply is also tight in SE Asia, notably Sarawak, and that demand in the Asia Pacific region is quite strong so this is likely to help support the recent price gains for West African species. [ITTO 15/12/14] Prices Squeezed By Competition From Meranti

Producers are of the opinion that demand in the EU is unlikely to change over the winter months but report that Middle East buyers remain active. However, West African timber exporters are beginning to see a downward pressure on export prices for some species due to the strong competition from SE Asian meranti sawnwood. [ITTO 15/12/14] Buyers Beginning To Look More Closely At Prices

International buyers are becoming more price conscious but, as yet, producers have not had to concede discounts mainly because log availability is currently in balance with demand. Producers firmly believe the current forest resource base offers little scope for increased production. FOB prices for logs and sawnwood have not changed over the past weeks after the small upward adjustments earlier this month. [ITTO 30/11/14] Hint Of Weakness In Demand For Okoume

Producers continue to watch for any sign of weakness in demand from China but, so far, trade levels are being maintained although some producers report a downward pressure on prices for okoume logs and sawnwood but say demand and prices for the redwoods are very firm. Demand in the EU for tropical timbers continues to be disappointing and compliance with the EUTR is increasing the cost of trading for both exporters and importers. [ITTO 30/11/14]

35 Cameroon Log Stockpile At Douala Finally Moving

The massive stockpile of logs at Douala port is slowly being reduced. Observers say some 150-200,000 m3 has already been shipped and that port operations should be back to normal and stock levels in balance by Q1 2015. In mid-November Douala International Terminal [DIT], the container terminal concessionaire, received new cranes ordered from Finland. The new equipment acquired by DIT for a total of CFA 5 billion is operational and has improved operations at the container terminal. [ITTO 15/12/14]

Ghana 2015 Budget Targets Forestry Development Plans

In the 2015 budget statement the Minister of Finance noted the continued implementation of the new ‘Forest and Wildlife Policy’. The move will shift the focus from over-reliance on timber harvesting to conservation and biodiversity. The new policy also encourages reforestation and restoration of degraded landscapes. A national wood tracking system under the Voluntary Partnership Agreement [VPA] between the Government and the European Union [EU] will be strengthened as under this agreement Ghana is to put in place effective systems to verify the legality of all timber exports and to strengthen forest governance. [ITTO 30/11/14]

For further details see: http://www.mofep.gov.gh/budget-statements Illegal Timber Trade Expected To End Soon

Trade in and the use of illegal timber and products in Ghana would soon become a thing of the past as government puts in place measures to tighten its grips on controlling the sector. To show its commitment and leadership in addressing illegal logging and trade in timber, as well as support the development of sustainable forest management, government has developed a Public Procurement Policy on timber and timber products for the domestic market and is currently developing guidelines. A stakeholder consultation was held in Tamale to seek input as well as on restructuring of the domestic timber market supply chain to improve availability of timber. It was organised by the Nature and Development Foundation, a non-governmental organisation, in collaboration with the Timber Industry Development Division [TIDD] of the Forestry Commission, the Ministry of Lands and Natural Resources and with support from the Food and Agricultural Organisation. The government under the Voluntary Partnership Agreement [VPA] signed with the European Union, is committed to ensure that legal timber is not traded on the export and domestic market. [GNA 15/12/14] EXIM Bank To Boost Exports

Ghana is to setup an Export-Import [EXIM] Bank with the aim of transforming growth in Ghana’s economy through expanded exports. This was specifically mentioned in the 2015 budget statement from the Ministry of Finance. According to the Association of Ghana Industries [AGI], the statement is welcome news for the manufacturing and timber businesses. The Ghana cabinet has already approved the setting up of a Presidential Committee to oversee the establishment of the Ghana EXIM Bank. [ITTO 30/11/14]

36 COMMODITY NEWS TOBACCO

Zimbabwe Tobacco Exports Earn US$730 Million

Zimbabwe earned more than US$730 million from tobacco exports since the beginning of the year. It exported about 130 million kilogrammes of tobacco to different parts of the world. Figures from the Tobacco Industry and Marketing Board [TIMB] show that as of December 5 tobacco export earnings were at US$736,2 million from 128.8 million kg sold at an average price of US$5,72 a kg. During the same period last year, a total of 146.8 million kg were exported at an average price of US$5,65 a kg, raking in US$830.2 million. This year’s tobacco export volumes were lower than in 2013 due to a recent industrial action at Mashonaland Tobacco Company. China, which in recent years has led as the major consumer of flue-cured tobacco from Zimbabwe, has maintained the top spot having so far spent US$401.9 million on 48 million kg at an average price of US$8.37 kg. [Chronicle 29/12/14]

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