Increased diversification makes agriculture sector in Côte d'Ivoire more resilient

In recent years the government has implemented new measures to advance the sector, including increased public investment and a long-term national development plan aimed at growing export capabilities – efforts that are beginning to bear fruit. Raising the level of local processing for domestically grown goods will be fundamental in adding value to the sector and lower the sector’s exposure to international price volatility. As two major cash earners that have potential for further growth, cocoa and cashew production have been targeted by recent government initiatives, such as the Enclave de la Banque Internationale de Reconstruction et de Développement, or the Enclave of the International Bank for Reconstruction and Development programme financed by With a wide variety of crops and a high number of cultivation regions, agriculture has long been a valuable economic sector for Côte d’Ivoire. The nation’s fertile land, sought-after cash crops and favourable climate have all contributed to the sector becoming a crucial source of revenue. Besides being the number-one cocoa producer in the world for many years, Côte d’Ivoire has also become one of the largest cashew nut exporters. Additionally, crops such as palm oil, rubber, cotton and tropical fruits – notably bananas, pineapples and coconuts – have also represented important agricultural exports, providing a varied output that has helped to make the sector more resilient against changing global markets and erratic weather patterns.

The government is seeking to raise the amount of domestic processing and in-country value addition, which would provide the agriculture sector with a competitive advantage when difficult global market conditions arise the World Bank. However, falling global cocoa prices will continue to pose challenges, inevitably affecting growers and exporters alike.

In Figures

In 1960 agriculture accounted for as much as 48% of GDP, however, the growth of the industry and services sectors over the years has diluted its prominence in the Ivorian economy. Nevertheless, agriculture represented 22% of GDP in 2016, and accounted for approximately 60% of the nation’s total exports. Although Côte d’Ivoire’s diverse mixture of exportable crops serves as an advantage for the most part, it does leave economic performance exposed to progressively unpredictable weather patterns. While the country has experienced a period of consistent growth, the lower levels of agricultural exports in 2016 and 2017 did translate to subdued growth prospects overall, according to the African Development Bank’s “African Economic Outlook 2017”, underlining the importance of agricultural policy for the country’s economic performance as a whole.

In addition, the practice of selling the majority of the country’s crops to international markets exposes the national economy to global price variations. This is evident in the impact that falling cocoa prices – which began in late 2016 and further deteriorated in 2017 – had on domestic industries.

Sector Policy

For these reasons, the government has prioritised agriculture and subsequent value-added industries for development, making the sector an essential pillar of the long-term National Development Plan, which has a view to transform Côte d’Ivoire into an emerging economy by 2020. Raising output and improving efficiency in everything from production yields to the supply chains that connect producers to domestic and international markets will be key. The Ministry of Agriculture and Rural Development oversees the sector and manages its long-term development strategy. Like most other sectors, agricultural development in Côte d’Ivoire was deeply disrupted by the decade-long conflict, leading to a contraction of investment. In an effort to revert the situation, authorities launched the first National Agricultural Investment Programme ( Programme National d’Investissement Agricole, PNIA), which earmarked CFA2trn (€3bn) to be invested in agriculture over the 2012-16 period. The plan was aimed at improving productivity and employment creation, as well as strengthening food security.

However, a lack of coordination between the government and supportive programmes run by multilateral institutions has hindered progress. “It was difficult to synchronise efforts and share statistics that would have helped measure the impact of the actions being implemented,” Joachim Lezou, operations manager of agriculture at the French Development Agency (Agence Française de Dé veloppement, AFD) in Abidjan, told OBG. However, in certain segments, such as the cashew industries, for example, headway has been much more visible. “Thanks to good policy and investment there was an improvement of the cashew varieties, which now are better adapted to our local conditions. These efforts have made the cashew segment grow sufficiently to rival cotton,” Lezou told OBG. To continue sector development, the government launched the second phase of PNIA to cover 2016-20, allocating an additional CFA2trn (€3bn) to agriculture. Authorities expect that 60% of the plan’s global investment will be covered by the private sector, with the remaining 40% secured by the government. During an international agriculture meeting held in Abidjan in September 2017, the government announced that as much as 80% of the necessary funds to implement the 2016-20 PNIA had been made available.

Cocoa

With Côte d’Ivoire producing around 40% of the world’s cocoa, the crop has become a lucrative export for the country. The segment supports over 800,000 local farmers, the majority of which are smallholder players. A 2012 reform set a minimum price threshold, which has substantially improved the quality of life for farmers and their families.

However, the cocoa segment has had a difficult couple of seasons, with excess production across a number of cocoa-growing countries forcing global prices down by more than 30% for the 2016/17 season. Ivorian cocoa production was expected to reach 2m tonnes, while other producing countries in the West Africa region – which collectively accounts for 70% of the world’s cocoa crop – reported substantially higher volumes as well. The excess in global cocoa offer, in hand with overambitious commitments taken on by Ivorian exporters, led to significant reductions in cocoa prices. In response, the government lowered its guaranteed price for cocoa farmers in March 2017, reducing it from CFA1100 (€1.65) to CFA700 (€1.05) per kg.

Cocoa crops are also showing increasing vulnerability to the unpredictable weather patterns being caused by climate change. The potential for variations that can affect production outcomes from year to year make it difficult for the sector to attract long-term investment commitments. Despite its position as the world’s top producer, yields remain lacklustre, with a nationwide average of 435 kg per ha. However, some agro-industrial development projects should improve yield-per-ha rates and make cocoa trees more resilient, hopefully serving as a way forward for the sector (see analysis).

Palm Oil

Côte d’Ivoire is West Africa’s second-largest palm oil producer after Nigeria and eighth-largest globally. After annual production fell from 415,900 tonnes in 2010 to 360,000 in 2012, the country successfully increased its yearly output to around 480,000 tonnes per year in 2017, up from 400,000 a year earlier in 2016, with the aim to reach 600,000 tonnes by 2020. Around 60% of Côte d’Ivoire’s palm oil comes from small village plantations. Ranging in size from 3-5 ha, these plantations are a strong source of sustainable employment for Ivorians and are estimated to account for upward of 2m jobs. The remaining 40% of production is handled by large-scale industrial groups, which are able to produce over double the tonnage per ha than small producers. Such industrial groups include domestic firm Dekeloil and the SIFCA Group. In addition to guaranteeing a relatively steady income for producers while taking up minimal land area, palm oil is also a household staple in Côte d’Ivoire and across the world, where it is used by numerous major food manufacturers. According to Jean-Louis Kodo, president of the Inter-professional Association of Palm Oil, the average consumer in Côte d’Ivoire consumed the equivalent of 8 kg of palm oil per year, while Senegal and some European countries consume 10kg and 12-14kg, respectively. In the downstream sector, the raw palm oil processing industry is dominated by Sania – a subsidiary of the SIFCA Group – with a 60% of market share. The firm is followed by Aya Oil, which has quickly positioned itself since its entry in 2014 and accounts for 15-20% of the market. A number of smaller firms make up the remainder of the sector.

Fertiliser

The make-up of Côte d’Ivoire’s cocoa segment also contributes to the low average yields: it is predominately based on smallholder farmers, who seldom have the required knowledge or capital to put best practices in place. “Low productivity among smallholder farmers continues to constrain the sector. This is caused by a combination of a lack of access to customised inputs, inadequate use of fertilisers and poor agricultural practices,” Mohammed Benzekri, vice-president for West Africa at OCP Africa, a Morocco-based firm that produces and sells fertiliser, told OBG. This is evident in how much fertiliser the sector utilises. Consumption remains relatively low but reached some 298,000 tonnes in 2016, up from 288,000 tonnes in 2015 – representing an increase of 4% – according to the 2016 International Fertiliser Development Centre Report. The cocoa segment is the biggest consumer of fertilisers, with consumption at 96,000 tonnes, followed by cotton with 86,000 tonnes. “With a high cocoa price in 2016, fertiliser sales were fairly strong. Still, it should be noted that an estimated 12-15% of cocoa farmers use fertilisers. With the challenges the segment is now facing, other interesting growth opportunities could come from cash crops such as cashew or hevea,” Ellen Cathrine Rasmussen, Côte d’Ivoire’s director-general for Yara West Africa, told OBG.

Cashew

With international demand driving prices upward, the cashew nut is fast becoming one of Côte d’Ivoire’s most dynamic exportable crops. In 2016 production rose by 24% to reach 702,500 tonnes, making Côte d’Ivoire the world’s largest cashew producer for the first time. The Association of Cashew Exporters of Côte d’Ivoire (L’Association des Exportateurs de Cajou de Côte d’Ivoire, AEC-CI) predicted a 7-9% increase in the country’s crop size for the 2017 season, which would translate to a production increase ranging 30,000-40,000 tonnes higher than the previous season. Looking ahead, Côte d’Ivoire’s strong position as a global leader in cashew production appears set to continue. Equally important have been the improvements in produce quality, which were driven to a great extent by ideal climatic conditions over the 2017 season. This was expected to lead to a 10-15% increase in the country’s exportable crop, according to the AEC-CI.

Rising global demand, and consequently rising cashew prices, have encouraged many new farmers to choose cashews over other crops. Consumption has increased in key markets such as Europe and the US, where annual imports of cashew grew by 8-10%, according to figures by the AEC-CI. This growing demand has brought an increase in liquidity into the market. Most of the cashew crop coming out of Côte d’Ivoire is exported raw and processed elsewhere.

“India is faced with a slightly reducing crop, while Cambodia and Vietnam have seen theirs stabilise as well; however, their processing capacities continue to go up, so they need to sustain that capacity. This creates a strong demand for West African crops,” Suraj Rao, second vice-president of the AEC-CI, told OBG. Vietnam’s processing capacity, for example, has increased significantly: imports by cashew processors in Vietnam have risen from some 700,000 tonnes in 2015 to approximately 1.1m tonnes in 2016, with early estimates outlining 1.3m tonnes of imported raw cashew in 2017. This provides Côte d’Ivoire with a strong export market.

Following a ruling made by ministry authorities in February 2017, minimum guaranteed prices per kg paid to cashew growers was increased to CFA440 (€0.66) for the 2017 season, up from CFA350 (€0.53) in 2016. Similar to the approach taken for the cocoa segment, the government has used minimum price guarantees to secure sufficient returns for growers. Local cashew farmers earned a total of CFA325bn (€487.5m) over the 2016 season. “At the moment I don’t see any reason why the prices should go down, unless there is a huge increase in production, or supply and demand dynamics change drastically, but as of now, supply and demand looks to be in balance,” Rao told OBG.

Currently, only 60,000 tonnes of the country’s total 700,000-tonne cashew crop is processed locally. Authorities are aiming to raise local cashew processing to 50% by 2020, with several incentives already put in place to encourage domestic players. “Cashew offers great opportunities in terms of the creation of a local value chain,” Kinapara Coulibaly, CEO of the National Office for Technical and Development Studies, told OBG. “We need to choose crops that will allow us to create a competitive and sustainable agricultural processing industry.”

Cotton

Cotton growers have expanded their reach in recent years, with production areas increasing from 185,000 ha in the 2009/10 season to over 402,000 ha by 2015/16, according to data from Intercotton, Côte d’Ivoire’s main professional cotton organisation. However, total production still alternates from year to year, due to the soil-depleting nature of the crop, with output reaching 450,000 tonnes of cotton seeds in the 2014/15 season, only to decrease to 310,000 tonnes in 2015/16.

The government has set the goal to produce 600,000 tonnes of cotton per year by 2020, and has been implementing a zoning policy for cotton production and processing to help increase the efficiency of the segment. As with other targeted produce, authorities have established minimum prices for cotton growers, awarding CFA265 (€0.40) per kg for the 2016/17 season.

Rice

As in many other countries, rice has become a strategic staple for Côte d’Ivoire. Rice production rose from 1270 tonnes in 2012 to 1400 tonnes in 2015, but declined slightly to 1340 tonnes in 2016, according to the National Office for Rice Development (Office National du Développement du Riz, ONDR). Raising the domestic output of rice has been a government priority since the first PNIA, and is a key component of broader efforts to improve national food security. One critical step was the establishment of the ONDR in 2012, which is charged with improving conditions for rice farmers, as well as overseeing and monitoring the segment.

Although rural areas are self-sufficient, with the rice consumed and grown in these areas being relatively equal, when you take the urban areas of the country into account, the overall domestic production is still below national consumption levels. Rice is therefore imported to meet this deficiency, with a sizeable volume of rice imports also being re-exported on to Côte d’Ivoire’s landlocked neighbours. New consumer demand for higher-end rice varieties has fuelled new imports as well. According to statistics from the ONDR, total consumption needs in 2016 reached 1.7m tonnes, while domestic production of rice reached 1.3m tonnes. More than 1.3m tonnes of rice was imported into Côte d’ Ivoire, but roughly 166,000 tonnes of this number was then re-exported. Looking ahead, authorities are implementing plans that will focus on increasing production yields and processing capacity, as well as facilitating market access for farmers.

The government has estimated the country will reach self-sufficiency for rice by 2019. “Achieving this will mean that there is enough locally harvested rice to feed the country’s needs,” Yves Joël Dirabou, director of planning and evaluation at the ONDR, told OBG. “The consumer will still be able to choose to buy imported rice, but there will be enough local supply to cover our needs.” It is expected that domestic production will surpass 2m tonnes per year by 2020, after which point the country aims to become a regional rice exporter.

Coffee

While the country has traditionally ranked third in the continent for coffee production – coming after Ethiopia and Uganda – Côte d’Ivoire’s coffee output has lost ground from its peak production levels of 380,000 tonnes in 2000, falling to an average of 100,000 tonnes per year, according to a 2017 report from the Cocoa-Coffee Council.

The government aims to push production volumes back up to 200,000 tonnes by 2020, and has focused on renovating coffee areas with stronger coffee varieties. Under this plan, authorities commissioned more than 30,000 ha to be replanted with coffee trees by mid-2017. However, climate conditions over the 2016/17 coffee season negatively impacted production. At the end of June 2017, which is typically the midpoint of the coffee production season, roughly 28,000 tonnes had been produced, a substantial reduction from the 104,000 tonnes produced over the same period the previous year.

As part of efforts to encourage more coffee growers to enter the market, authorities have steadily raised the minimum guaranteed price paid to producers, boosting it from CFA620 (€0.93) per kg in 2012/13 to CFA750 (€1.13) per kg in 2016/17. As of early 2018, only 19% of the country’s coffee production is transformed locally, but the government’s goal is to increase this rate to 35% by 2020. The sector’s future will depend on support programmes to counter the lower production levels resulting from coffee areas undergoing restoration.

Hevea

The government has already seen positive results from its focused efforts to bolster the country’s hevea segment, with output volumes growing from around 402,000 tonnes in 2015 to reach 468,000 tonnes in 2016, according to the Professional Association of Natural Rubber of Côte d’ Ivoire (Association des Professionnels du Caoutchouc Naturel de Côte d’Ivoire, APROMAC).

Côte d’Ivoire is the largest producer of hevea in Africa, accounting for 60% of the continent’s total output. The government has targeted production volumes of 600,000 tonnes per year by 2020. Yielding monthly incomes for growers, hevea plantations are a relatively low-risk crop for farmers looking to diversify their income, and the price of hevea has risen significantly in recent years, making it an increasingly popular crop. In addition to new hevea farmers joining the market, it is also starting to replace other subsistence crops, such as manioc and banana. Despite the overall upsurge, however, hevea prices have fallen from their 2011 peak of CFA766 (€1.15) per kg to CFA228 (€0.34) per kg in February 2016. However, prices began to rebound in September 2016, registering a CFA150 (€0.23) increase over the first five months of 2017.

Hevea Prices

The acute reliance of the hevea industry on export markets has left it vulnerable to global price fluctuations. As a result, hevea output variations from Thailand – which is the world’s biggest hevea producer – have a notable impact on international prices for the commodity. Despite this, the segment still serves an important economic earner, bringing in CFA362bn (€543m) to the Ivorian economy in 2016 and providing employment for 160,000 farmers, according to APROMAC.

Hevea has traditionally been harvested in the southern regions of the country, though plantation areas have been moving further north in recent years. Hevea trees typically start producing after six years and have an average lifespan of 30 years. As of September 2017, there were 562,000 ha of hevea plantations in the country, of which some 512,000 ha was made up of smallholder farms, while the remaining 50,000 ha was managed directly by large-scale producers. The vast majority of hevea producers have been adequately incorporated within the supply chain of natural rubber producers. Generally, the income from hevea is paid to farmers via multinational companies that buy raw hevea produce and transform it. For the most part, farmers need to be included in the supply chain of a multinational, otherwise they face being forced to turn to the illegal market to sell their produce.

A regulatory body to simultaneously oversee the hevea and palm oil industries is currently in the process of being set up. Following governing bodies that have been set up for the cocoa, coffee, cotton and cashew segments, this new authority will group industry professionals, growers and government representatives. The new draft law providing for the creation of the dual-segment regulatory body was adopted in late 2016, but the details for its implementation were not released as of early 2018.

The hevea segment is also expected to benefit from increased processing capabilities, with 12 processing units expected to be operational by the end of 2017. Furthermore, a joint programme between the AFD and the World Bank is scheduled to allocate up to CFA6bn (€9m) to developing value chains in the hevea segment over the 2016-20 period.

Fruits

Côte d’Ivoire’s natural conditions make it ideal for fruit production, with pineapple and banana traditionally representing most of the country’s fruit exports. Pineapple, once a major export for Côte d’Ivoire, has since seen production levels severely undercut by the civil conflict. Annual production of pineapple has fallen from 230,000 tonnes in 2002 to approximately 30,000 tonnes in 2017, according to figures by the country’s Central Organisation for Banana and Pineapple Producers and Exporters (Organisation Centrale des Producteurs Exportateurs d’Ananas Banane, OCAB).

The sector remains organised around small cooperatives, but the market share of exports, which are primarily sent to European countries, was badly affected by stronger competition from Latin America. In the 1990s Costa Rica accelerated exports of its own pineapple variety, which is less acidic than the Smooth Cayenne pineapples that are produced in Côte d’Ivoire. In addition, Côte d’Ivoire exports 300,000 tonnes of banana annually, mostly to European countries, such as Germany, the UK, France and Belgium. For the most part, fruit has generally been exported to international markets further abroad, but improving economic conditions in the region may, over time, create closer potential markets. “Export is not always the way to go. You have a growing middle class that requires quality agricultural produce, both in Côte d’Ivoire as well as in the rest of the sub-region. There is local demand for quality products,” Paul Jeangille, executive secretary at OCAB, told OBG.

Outlook

Supported by public financing and multilateral organisations, a host of long-term development strategies are improving production techniques across the board, even though there have been some coordination issues in implementation. Given the sector’s strong foundations, it is likely to continue attracting investment inflows, though this will be dependent on the overarching political stability. Infrastructure improvements will also be necessary to enhance the storage capacity for higher levels of agricultural output. According to the African Development Bank’s “African Economic Outlook 2017”, the existing lack of inadequate conditioning and storage facilities is causing losses in several produce segments that are key to food security. It is estimated that 10% of manioc production, 30% of yams, and as much as 40% of all domestically produced plantain is currently lost due to insufficient infrastructure.

In addition, the current lack of roadway connections hinders agricultural produce from reaching the domestic market, especially in more isolated areas in the north of the country, where a part of the agricultural output ends up being sold to neighbouring countries – often informally – because they are more accessible. Despite these persisting challenges, a combination of private and public investment, coupled with improved techniques and a continued effort to diversify agricultural production, will strengthen growth over the medium term.