Cocoa Dinner 1999

Speech by Mr Peter Robb, Chairman of the Cocoa Association of London Ltd at the Cocoa Dinner on Friday 7th May 1999 at the Grosvenor House.

"Minister, (Your Excellencies) Ambassadors and High Commissioners representing our many friends around the world, my lords, ladies and gentlemen. The Association is honoured to welcome you here this evening. It is truly wonderful to address the international cocoa community in such splendid surroundings and enhanced by Symphony No.9 "From the New World". What the next century will mean in terms of a "new world" for cocoa is very much up to all of us here tonight.

We are very fortunate to have with us today the Rt. Hon Nick Brown, Minster of Agriculture Fisheries and Food and Baroness Valerie Amos who represents the UK Department for International Development. We are fortunate also to have the Ambassadors and High Commissioners of most of the cocoa producing countries - the countries without which we would not be here this evening.

We also have with us representatives of other cocoa and cocoa related organisations including the French, Dutch and German Cocoa Associations; the European and International chocolate and confectionery bodies and the Ghana Cocoa Board.

I am pleased to note that the London International Financial Futures and Options Exchange and the London Clearing House are also well represented here tonight since we do enjoy a special relationship with these organisations in providing a range of services to the cocoa market.

Tonight we must regrettably note the passing of René Ekra whose tragic death on April 16th represents a great loss to the cocoa world. René was to have been with us this evening as a representative of GEPEX.

It is significant that for the first time we have with us representatives of the international development agencies and the World Bank. This reflects a realisation within both trade and industry and within the donor institutions that the fundamental changes required to build a prosperous future for the whole of the cocoa trade cannot be achieved through either trade or aid alone. The expression of such sentiments is not new but we must recognise that we all have to work much closer together than we have in the past to make a better cocoa world. We must aim to transform these sentiments into action.

There are several exciting projects currently under development for the benefit of those who depend on cocoa. However, without due attention to realistic commercialisation, these projects may not produce the desired results as quickly as we would like. The Association shall certainly be seeking to contribute positively in this respect.

During the past 12 months the CAL has broadened its profile to encourage the input of a diverse range of organisations who can further the cause of cocoa. I will come back to this point a little later.

Tonight will be in part a working dinner - my liking for these is, of course well known throughout the industry!! In our theme tonight we decided to create an environment in which we can reflect on the current cocoa market and briefly consider what may be possible for cocoa in the future. As we approach the next millennium can we predict whether the cocoa images you see around this splendid room this evening will be the same 20 years from now?

What have we done in recent times to benefit the cocoa market and those who work within it? Have we worked in partnership with other organisations, which have very different agendas to the commercial schedule that many of us work to on a daily basis? Those assembled here can make the cocoa world whatever they want it to be in the future, providing we can earn and secure the support of cocoa farmers. Productive partnerships amongst all those involved in cocoa and the assistance of developing countries engaged in cocoa production must be our focus.

Let us, however, spare a moment to think of those who are not here tonight but upon whom we have considerable dependence - namely the hundreds of thousands of cocoa farmers and their families together with the extension workers and the many others involved in the cocoa market.

The neutral observer may think that fundamentally little has changed within our market for many years. We in the trade and industry are of course very aware of the major changes brought about by bulk cocoa shipments and increased vertical integration resulting in fewer businesses involved in the cocoa trade than 10 years ago. However, cocoa quality seems to be more under threat today than at any time in the past.

The recent cocoa price collapse does not help even if we have experienced similar situations previously.

Liberalisation is another contributory factor and whilst in itself a perfectly sound ideology, it can be steeped in logistical and practical problems for those living in countries which lack the infrastructure and the financial systems to cope with the expectations of consuming countries.

I would particularly focus upon those aspects related to counterparty risk and risk management generally. What is being done to address these concerns? From the other "New World" John McIntire of the World Bank will be given the floor in a few minutes to respond to these observations. This is a very important year for cocoa, which will witness the liberalisation of the cocoa market in the Côte D' Ivoire. Many cocoa market participants have urged caution in relation to cocoa liberalisation projects because of the concerns at the capacity of the internal markets of the affected countries to cope with radical change. If the services formerly provided by responsible marketing boards are dispensed with too quickly, then the market disruption that will ensue should not be unexpected. Unless we are careful, the negative impact, which may affect the lives of many at origin, could be felt around the world.

It is clear that fundamental changes are taking place, which will bring about a greatly improved co-ordination of the many and various interest groups, which are involved in all aspects of the cocoa market. This Association will play its' part in the recently inaugurated International Sustainable Cocoa Programme to develop a way forward which embraces environmental, economic and cultural issues. As it evolves, the sustainable cocoa philosophy will inevitably mean that the liberalisation issue must be revisited.

The necessity for a sustainable approach to cocoa quality has brought the CAL closer to research organisations such as ACRI and CIRAD both directly and by virtue of our interests in Cocoa Research UK. In turn we are quite naturally initiating dialogue with lending institutions and development agencies as the need arises. The sustainable cocoa approach necessitates some linkage between farmer incentive and consumer benefit. The two must go together and our contribution will be best realised in the commercialisation of the fundamental issues that will emerge.

The efforts of the Sustainable Cocoa Programme will benefit from the work being undertaken by the Quality Task Force of the International Cocoa Organisation upon which we are also represented. The changes taking place within the ICCO are also very important. If we are to achieve genuine progress in addressing the problems of the cocoa market, the CAL must continue to assist the ICCO wherever possible.

With the guidance of our previous chairman, Anthony Ward, and through the efforts of our CEO - Philip Sigley, the Association is making the changes necessary to respond to the restructuring of the cocoa market.

The challenge for the future could be expressed as the creation of a quality management system in its' widest sense which embraces the whole of the cocoa chain. Secure warehousing, integrity of warehouse warrants and collateral management options would all be capable of featuring in the design of such a system.

There are a number of ways to approach the problem of secure warehousing systems and warrant validity. But the point at which the farmer or co-operative, lodges cocoa into any quality system is absolutely critical. At this particular stage we should find a way to build a link between the delivery of good quality cocoa and the supply of inputs to revitalise degraded land. This can only be achieved in conjunction with aid agencies and other extension services.

If the World Bank wishes to achieve the best for the liberalising markets then it must work with us to find a way of establishing guarantees for the integrity of warehouse warrants to allow faster rotation of origin cocoa within a secure environment and solid counterparty risk.

We must believe, that in time, we can achieve a world class quality management system for cocoa - we need to have a vision of the system that will help to achieve the expectations of the participants; and we should resist the notion that certain things are unchangeable. Tonight, I am asking you to indulge in such possibilities because if we are successful in our vision then we will be helping our world in so many ways.

We value the vital contribution of LIFFE and the LCH to our trade and hope that progressively their services can be extended to support us even further.

A Task Force for Risk Management in emerging markets has been established by the World Bank, which recognises and will help to address the need for extension of financial services to our partners in the cocoa producing countries. Indeed, the association has made its' own contribution by developing the first draft of a Market Awareness and Risk Management education and training module as a discussion document. The output from this Task Force will hopefully give recognition to a lot of effort and valuable input from UNCTAD and those of us who supported the "Partners in Development Summit" in Lyon in November 1998.

One issue I would like to focus upon, is that associations and exchanges possess and have the ability to supply the creativity and expertise to complement the efforts of others in delivering solutions to developing markets. We do not respond well to receiving World Bank tenders for services since we are not essentially engaged in the consultancy business and consequently, bids are not submitted even though we maybe prepared to assist if certain costs can be covered. This issue must be addressed in the future. We welcome any approach, which would enable our organisations to contribute in a commercial way while avoiding conflicts of interest with members or shareholders.

It is important on an evening such as this to say thank you to those whose contribution to cocoa has been very much valued by us. Firstly, to all my fellow members of Council, to all the arbitrators for their support for the Association and particularly Mr Alan Cook our Senior Arbitrator who is always on call to provide us with the benefit of his experience. To Mr. Ian Taylor who until recently was our representative on the Comité Directeur of the AFCC and a marvellous contributor to contracts and regulations. To Aad Van der Velden and Robin Dand who have contributed much to contracts and regulations. Aad recently retired from the Council and unfortunately cannot be with us tonight but we wish him all the best for the future.To our guests from the Cote D' Ivoire in this year of liberalisation, we wish them well and offer our continuing support. And our thanks also go to the ICCO - particularly Edouard Kouamé and Jan Vingerhoets. To the AFCC, the NCV and the German Verein with whom we always try to co-operate. Also, this evening would not have been possible without the tremendous support of our principal sponsors: Fimat International Banque, Credit Lyonnais Rouse, BW Agencies, Rudolf Wolf, M H F Futures and LIFFE.

I would now like to introduce our guest speaker, John McIntire, who is the Principal Economist of the World Bank in Abidjan. There have been criticisms of the World Bank and what some of us need to understand is why radical changes are seemingly forced through without first establishing the private sector structures that are necessary to avoid market disruption. I now invite John, to respond to my brief address and to deliver his own message in this critical year about the World Bank's cocoa philosophy, in particular to give us all a first hand insight into the current position and what we might expect in the future with regard to the cocoa market in the Cote d' Ivoire.

I would now ask you all to please welcome Mr John McIntire.