SAF-CACAO Liquidation

SAF-CACAO Liquidation, Shocks On The International Cocoa Market And The Ivoirian Banking Sector. Traders Or Commodity Finance Banks XIX

Pirrong (2015) argues that historically, the financial distress of a commodity trader does not mean that the supply of commodity transformation services will decline and that mining firms will fail and go through insolvency or bankruptcy without larger systemic effects for the economy and “little knock-on effects”. (the de-facto null hypothesis H0).

Get Our Activist Investing Case Study!

Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below!

We respect your email privacy

Q2 hedge fund letters, conference, scoops etc

The contention, we fear, is challenged in the case of a small economy where a commodity is largely tributary to the economic ouput Y, BoP and credit supply.

The liquidation of CI’s second-largest cocoa trader/exporter has triggered a solvency crisis and will necessitate a re-capitalization of the Ivorian banking sector.

A Banking Sector in Crisis

SAF-CACAO Liquidation

Social Capital of 6 Banks vs their losses on trader SAF-CACAO.

West African Central Bank BCEAO 2018

via jacquessimon506.files.wordpress

BNP Paribas- via BICICI eats $ 13M in the bankruptcy of the trader SAF cacao. 23% of its profits. The subsidiary however can take some heat.

The situation that is real according to the exchanges off the records (with banks and lawyers).

What can I say:
1-The financing of cocoa exports represents an essential part of the credits made by the banks in CI (first cocoa producer, more than 1.3 million tons / year).
2– These are short-term credits, the main campaign lasts 3 to 4 months after which credits are reimbursed, normally. If these campaign credits are the windfall of the banks because profitable, they involve however important risks (Buyers edge field and Exporters in particular) to know to be constantly monitored.
3-Three actors hold control of operations:

the Cocoa-Coffee Council, the dismemberment of the State, the Exporters, the Banks.

Jacques S. and Simondet (2016) explores with stylistic examples how risk is baked into Traders (Trafigura*) and then embedded into the commodity markets.

Are commodity traders systemically risky ? The recent events unfolding the default of a cocoa trader in the french-legacy Côte d’Ivoire will test the assertion !

Article by Simon Jacques

Saved Articles

Are you a smart investor? Join tens of thousands of sophisticated investor reading our authoritative free newsletter

* indicates required

Congrats! Are you a smart person?

We have an exclusive targeted for being a sophisticated and loyal reader.

Sign up today and get three months free

Use coupon code vip19 or click on the button below

Limited time offer only ENDS 10/31/2019 or after next 25 20 subscribers take advantage whichever comes first – please do not share this discount with others