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COCOA farmers in Ghana will earn GH₵1,000 more than their counterparts in La Cote d'Ivoire for the producer price of the commodity in the 2018/2019 crop season which opened on October 1, 2018.

This is in spite of Cote d’Ivoire, the world’s top cocoa producer, increasing guaranteed price it pays farmers by seven per cent– i.e. $1.34per kilogramme while Ghana kept its price flat at $1.53 per kilogramme, which translates to GH₵475 per a bag of 64 kilogrammes.

Volatility in the price of cocoa on the world market

Ghana fixed the price of GH₵7,600 since the 2016/17 cocoa season when the average world market price was $2,950 a tonne. The current average world market price is $2,200 a tonne.

GH₵ 6,600 Producer Price in Cote d'Ivoire

Cote d'Ivoire currently has a Producer Price equivalent to GH₵ 6,600.

$750 drop in cocoa price on the world market

This means that between the 2016/17 cocoa season and the current 2018/2019 crop season, the world market price per a tone of cocoa has declined by $750.

Yet, the government of Ghana decided not to reduce the amount paid farmers.

Smuggling

Price differentials in the two top producers of cocoa usually lead to smuggling of the commodity to the country with higher producer price.

How Ivorian farmers sell cocoa

Ivorian farmers sell cocoa to international producers such as Barry Callebaut through state-organised auctions, meaning local prices are relatively responsive to global prices changes. 

How Ghanaian farmers sell cocoa

In contrast, Ghana’s COCOBOD buys the beans at a price set at the start of the season, which prevents farmers from selling to other buyers. 

Ghana sells forward the bulk of its anticipated harvest to be able to set a minimum price for farmers, known as the farmgate price, at the start of the season on Oct. 1. 

Two-cycle cocoa season in Ghana

The country operates a two-cycle cocoa season consisting of the main crop, which is mainly exported to Europe at a premium, and a light crop harvest which is discounted by around 20 percent to local grinders. 

700,000 tonnes of beans exported annually

At least 700,000 tonnes of premium beans from the main crop harvest is exported annually.

Ghana and Cote D'Ivoire cartel plans

The decision by Ghana and Cote D’Ivoire to announce their prices on the same day was the first step towards an eventual harmonisation of prices they hope will enable them to run an OPEC-like cartel.

Announcing the new cocoa producer price in Accra at a ceremony to mark this year’s World Cocoa Day in Accra, Minister of Food and Agriculture, Dr. Owusu Afriyie Akoto, explained that government decided to maintain the price to cushion cocoa farmers despite the sharp drop in the price on the world market.

Govt loses over $1 billion

He noted that the drop in the price of the commodity since the 2016/17 cocoa season has already cost government over $1 billion since Government, he said, has maintained the producer price of cocoa in order to eliminate the harsh effects of the drastic decline in international cocoa prices on the earning of hardworking Ghanaian farmers.

He pointed out that the huge drop in the world price of cocoa has reduced revenues to an extent that the stabilization fund is not enough to cushion farmers and other stakeholders in the domestic value chain.

The Minister indicated that government was working hard to turn around the fortunes of local farmers.

Productivity Enhancement Programmes

Chief Executive of COCOBOD, Joseph Boahen Aidoo, said his outfit has made tremendous progress in its Productivity Enhancement Programmes (PEPs).

He said the combined effects of the mass pruning, hand pollination, fertilizer application, mass spraying and other interventions COCOBOD initiated have been very marvelous.

In his opinion, if cocoa farmers across the country will collaborate with extension officers, adhere to good agronomic practices, and adopt the PEPs including the hand pollination, yield per acre will increase significantly from the current average 450 kg to over 1,000 kg.

He announced that some investors have signed onto the PEP initiative following government’s drive to increase local processing of cocoa.

Mr Aidoo further announced that Ghana is collaborating with China, which offers a big market for cocoa confectioneries and related products.

“Again, there are lot of small-and-medium businesses that have taken advantage of the rich opportunities in this campaign to create jobs and boost economic growth,” he indicated.

He was optimistic that more companies will get on board to support government and COCOBOD achieve the target of ensuring that at least 50 percent of cocoa produced in Ghana is processed to tertiary level to boost local consumption.

He said in the bid to enhance local consumption, government was encouraging domestic processing in order to raise the per capita consumption to sustain the price.

In this direction, he said COCOBOD and government were close to rolling out the inclusion of chocolate drinks in the school feeding programme to benefit over one million school children during the pilot phase.

Mr Aidoo said discussions were ongoing with stakeholders to conclude the modalities for the roll out of the programme. 

“We trust that as we intensify local value addition and consume more cocoa, we will gradually insulate our economies from any price volatility,” he said.

Mr Aidoo said Ghana and Cote d’Ivoire were working together to streamline marketing, economics, production and research activities of cocoa to enable both countries reap the full benefits of trading in the crop.

COCOBOD failed farmers - World Bank report

A World Bank report published this year said COCOBOD failed in stabilising farm gate prices at levels that permit farmers to earn an adequate return on their lands, labour and capital. 

The report published titled 'Fiscal Consolidation to Accelerate Growth and Support Inclusive Development’, criticised successive governments for prioritising revenue generation and treating the final price received by farmers as a secondary consideration rather than the objective.

The report recommended a renewed focus on price stability, saying it would help reduce the economic uncertainty faced by cocoa farmers, facilitate long-term planning and boost productivity. 

The World Bank report was unhappy about COCOBOD's dominant role in the supply chain of the cocoa subsector, describing it as “a source of uncertainty and inefficiency. 

“Though often referred to as 'free inputs’, the cost of the inputs supplied by COCOBOD reflected in the prices farmers receive for their produce; moreover, input distribution is often erratic and is subject to corruption and capricious political interference,” the report revealed.

It was unhappy about the fact the while all farmers paid for cocoa inputs, only selected farmers received them, and in some cases “COCOBOD inputs have been illegally exported to neighbouring countries”.

COCOBOD is the principal supplier of fertilisers, pesticides, and seedlings to the cocoa subsector. 

According to the report, COCOBOD's pricing mechanism had succeeded in limiting competition in the Cocoa subsector. 

It explained that the fixed price paid by licensed buying companies to farmers had effectively eliminated the possibility of price competition or product differentiation, adding “it has discouraged farmers from investing in quality beyond the minimum standard”.

The report described the marketing costs of cocoa in Ghana as unduly high per international standards, estimating that “total marketing costs are between 25 and 30% of the FOB price; this includes direct marketing costs of about 17 percentage points plus an estimated 8 to 10 percentage points to offset the COCOBOD's costs”.

It further attributed the high marketing costs to poor road infrastructure, inefficient port handling and costs associated with quality control. 

Cocoa sector contributes 4.22%to GDP

The cocoa sector contributes 4.22% of Gross Domestic Products (GDP) and 30% of export earnings for Ghana.

1 Million tonnes by 2020

Ghana, the second largest producing country in the world, targets to raise production to 1 million tonnes by 2020, from the current annual output of over 900,000 tonnes.

Ghana, Ivory Coast get only $5.75bn out of $100bn chocolate market

Even though the two countries contributed to more than 60% of the world’s cocoa output, their total earning from the sale of cocoa beans amounted to a paltry $5.75 billion whereas the chocolate market was worth some $100 billion.

Ghana, Ivory Coast produces 60% world’s cocoa

It means that the farmers whose toil and sweat produced 60% plus of the world’s cocoa earned 5.75% of the global value of their activity. 

Shippers cut freight charges by 9.4%

Shippers ferrying Ghana’s cocoa exports to Europe have cut their freight charges by 9.4% for the October-September season to compensate the country for recent global bean price falls.

Shippers will charge 35 pounds per tonne for cocoa shipments to Europe, compared with the 39 pounds its members received in the previous season. 

The reduction in the tariffs was mainly due to recent price volatilities in global cocoa prices. 

 $1.2b loan

The African Development Bank last year agreed to provide $1.2 billion to finance the harmonisation plan, which includes construction of modern storage facilities, farm rehabilitation and disease control.

Ghana, Ivory Coast cocoa plan to have limited effect on world prices 

Plans by the world’s top cocoa growers –Cote d’Ivoire and Ghana - to harmonise bean prices are unlikely to have much effect on world markets because of differences between their marketing systems and minimal domestic processing, Fitch Solutions analysts said. 

The two countries account for about 60 percent of global output but exert limited influence over international prices, which have stayed low in recent years due to overproduction. 

In response, they struck a deal last month to coordinate their farmgate prices for the upcoming October-to-September growing season. 

The collaboration is meant to emulate the OPEC oil cartel. 

But a report by Fitch Solutions, a unit of ratings agency Fitch, said that would be difficult to achieve, citing wide differences in how Ivory Coast and Ghana export their crop, most of which leaves West Africa in a raw or semi-finished state. 

Talks between Cote d’Ivoire and Ghana followed intense market volatility over the last two years.

In order to effectively harmonize prices, Fitch Solutions said, one of the countries would need to overhaul its market structure, but neither side has indicated it is prepared to make wholesale changes. 

This year, World Cocoa Day celebration emphasized health benefits of cocoa and business opportunities within the National Cocoa Consumption Agenda.

 

Cocoa Day celebration is aimed at recognizing the efforts of hardworking cocoa farmers; sensitizing the public on the health and nutritional benefits of cocoa and encouraging the citizenry to consume cocoa daily.