Determinants of Liberian Farmgate Cocoa Prices

In an effort to increase growth, employment and diversify farmer portfolios and exports in Liberia, the government is currently focused on opportunities in smallholder tree crops. Smallholder cocoa has the potential to benefit a wide population of farmers by increasing income opportunities and adding to overall household food security. However, the government must contend with a chaotic buyer driven marketplace with limited access to financial and physical capital and relatively little incentive to enhance production capacity and ensure quality. This research describes the characteristics of Liberian cocoa producing and marketing households in order to give context to smallholder marketing decisions during the 2006/07 cocoa season. The research further identifies factors that affect the price formation of farmgate cocoa prices. Liberian cocoa farmers are receiving limited price signals due to the institutional, market-level and infrastructure-oriented transactions costs that constitute a sizeable gap between farmgate and world prices.