Wednesday, October 9, 2019

Ghana and Ivory Coast hatch a plan to help cocoa farmers


The WSJ (Oct.2019) describes that a plan to tax cocoa exports from Ghana and Ivory Coast is causing turmoil in the futures market for cocoa. The plan is to use the tax to provide aid for cocoa farmers.

Here is the comment I posted.
Tax on cocoa sold from Ghana and Ivory Coast => decrease in supply, of cocoa from Ghana and Ivory Coast,  increase in price paid by buyers, decrease in price excluding tax received by sellers, and $400 more for government. If the government transfers the $400 to farmers, their average revenue would increase.

High price paid by buyers for cocoa from Ghana and Ivory Coast => increase demand for cocoa grown elsewhere and higher prices and quantities sold for sellers in other countries. In long run, the sellers in other countries would grow more and drive price for everyone down, perhaps back to the original level.

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