ABIDJAN (Reuters) -Cashew nut processors in Ivory Coast have asked the government to renew a subsidy deal, warning of bankruptcy if support for the struggling sector is not forthcoming, as data on Wednesday showed just 22% of output was processed locally in 2023.
Ivory Coast, the world's largest cocoa producer, has also become a leading grower of cashew nuts in recent years, but only a fraction of its nuts are processed locally as firms face steep competition from deeper-pocketed Asian exporters.
The Ivory Coast Cashew Industry Group (GTCI), which represents five cashew processors with capacity to process 41,000 metric tons per year, appealed to the government in a letter at the end of December seen by Reuters this week.
It asked for the renewal of an arrangement with the state that guaranteed raw cashew nut supplies of up to 20% of the GTCI's processing capacity at the start of each season.
With the 2024 processing season imminent, the GTCI said its members were at risk of going bankrupt without support.
"All we are asking is to be able to renew the agreement for the next 4 years," the letter said.
For the past two years, annual state support to the cashew sector has amounted to around 10 billion CFA francs ($16 million), according to a government source.
The GTCI's request is still being considered as expensive cashew and cocoa subsidies are straining public funds, said another source at the finance ministry, speaking on condition of anonymity.
FARMGATE PRICE DROPS
Cashew nut output is expected to rise to 1.25 million tons this year, about 5% higher than in 2023, Agriculture Minister Kobenan Kouassi Adjoumani told reporters on Wednesday.
Last year, Ivory Coast exported 849,250 tons of cashews, compared with 719,900 tons in 2022, he said, adding that 81% of exports went to Vietnam and about 18% to India.
Adjoumani said that 265,863 tons were processed locally in 2023. This represents just 22% of output.
Ivory Coast plans to process 50% of its output by 2026 through tax breaks and government subsidies, according to the CCA sector regulator.
To support the industry processors are also exempt from paying import taxes on equipment and export tax on processed cashews.
Around eight Ivorian cashew processors have gone bankrupt since 2020, according the GTCI.
The cashew season usually runs from February to June. It officially starts once the government has set a guaranteed minimum price for cashew farmers.
This year's farmgate price has been set at 275 CFA francs ($0.4557) per kilogram, down from 315 francs last year, Adjoumani said.
($1 = 603.5000 CFA francs)
(Writing by Sofia Christensen and Anait Miridzhanian; Editing by Ros Russell and Jonathan Oatis)
By Ange Aboa and Loucoumane Coulibaly
