Cocoa and coffee pricing policies in Cote d'Ivoire

Coffee and cocoa are Cote d'Ivoire's two most important commodity exports, accounting for about 50 percent of total exports. Falling world prices and an appreciating currency have cut into sales of Ivorian coffee and cocoa at the same time that international supplies have mounted. As several major producers backed up their export efforts with aggressive exchange rate policies, Cote d'Ivoire's exporters lost their competitive position. To offset the slump in revenues, the government needs to reverse this decline in competitiveness. A study under different pricing and subsidy policies confirms that coffee production should be increased, even at the cost of some reduction in the output of cocoa. This will avoid large government subsidies to cocoa growers and will increase future exports of both products. Under current market conditions, government-established producer prices are no match for rapidly changing world markets and exchange rates. Unless Cote d'Ivoire adopts a flexible pricing policy, the country may face continuing problems in international competitiveness.