COCOBOD, Ghana’s cocoa industry regulator finds itself in an unstable financial position as it pushes for a substantial increase in the farmgate price of cocoa.
Despite its obvious lack of funds, the Ghana Cocoa Board is negotiating with the government to approve a 65% hike in the price paid to farmers. This raises it to 54,656 cedis ($3,488) per ton or 3,416 cedis per 64-kilogram bag.
This comes as COCOBOD grapples with multiple challenges, including declining harvests, rampant smuggling and severe financial constraints.
The proposed price increase is primarily driven by concerns that neighbouring Ivory Coast will significantly raise its own cocoa prices, potentially leading to cross-border smuggling if Ghana’s prices don’t keep pace.
The global cocoa market has seen prices double in the past year, reaching over $7,000 a ton due to poor harvests in West Africa. However, farmers in Ghana and Ivory Coast, where prices are government-regulated, have not reaped the benefits of this surge.
COCOBOD’s financial woes are evident in its struggle to secure funding for the new cocoa season. The regulator has drastically reduced its initial syndicated loan request from $1.5 billion to $600 million and is seeking an additional $500 million short-term loan from cocoa traders.
Ghana’s cocoa production has been on a downward trend for the past three years, with the International Cocoa Organization estimating the most recent harvest at just 501,000 tons, far below the 850,000-ton target. This decline is attributed to various factors, including adverse weather conditions, disease, lack of inputs, and smuggling.
The timing of this potential price hike is politically sensitive, coming just months before Ghana’s December 7 presidential elections. A substantial increase could potentially sway the voting decisions of over 800,000 cocoa growers in the country.
