Plans have recently been progressed by data infrastructure firm, Intercontinental Exchange, has confirmed that ICE Benchmark Administration Limited (IBA) is on course to create an ICE Commodity Traceability (ICoT) service supporting sectors including cocoa to ensure they meet upcoming EU legislation on deforestation, writes Neill Barston.
The global commodities market, which is primarily centred on New York an London for the cocoa trade, has endured controversy in recent years, amid claims of a number of instances of major confectionery companies had attempted to bypass buying physical crops through conventional means, and instead buying them via stock markets – which some sector observers in West Africa expressed concerns that commitments were not being met towards the payment of ‘living income differential’ tariffs $400 a tonne owned to farming communities.
As for ICoT, its developers explained that it is set to launch by the end of next year, and has been devised to support cocoa customers s in demonstrating their compliance with regulation being introduced by the EU to minimise the extent to which the consumption of certain commodities in the EU, including cocoa and coffee, result in deforestation worldwide.
“Recognising ICE’s established position in the cocoa and coffee markets, where the benchmark prices for these commodities are formed every day, ICE has been working closely with the industry to design a solution to help customers meet the requirements of the deforestation regulation. This includes the need to receive and verify supply chain data from sellers when entering into transactions,” said Toby Brandon, Senior Director, ICE Soft Commodity Operations.
“ICE’s customers, stakeholders, and the countries where cocoa and coffee are grown, have made significant investments in supply chain sustainability processes and technology over many years. ICoT builds on this infrastructure by providing a single, standardised platform, allowing the multiple technologies which will be used by customers to provide farmer location and traceability data required by the deforestation regulation. ICoT will independently validate this data to allow cocoa and coffee to be readily traded and placed on the EU market,” continued Brandon.
Furthermore, ICE’s benchmark Cocoa, London Cocoa, Coffee C®and Robusta Coffee futures and options contracts are the largest markets in the world to trade cocoa and coffee. Last year the equivalent of over 500 million tons traded on ICE’s cocoa and coffee markets.
“By collating, standardising and validating supply chain data, ICoT will assist customers in demonstrating compliance from the farm to European consumer product,” said Clive de Ruig, President of IBA. “ICoT is designed to facilitate customers’ successful implementation of the deforestation regulation and maintain the free-flowing and commoditised physical trade of cocoa and coffee, which is crucial for countries where the commodities originate and to businesses in the EU.”
“Users of ICoT will benefit from IBA’s proven and market-leading technology and data management, together with IBA’s long-standing experience and reputation for establishing robust and independent governance processes and oversight functions,” continued de Ruig. “Combining this expertise with ICE’s established position in commodity markets means that we are well-placed to help customers meet the requirements of the new regulation.”