Cocoa industry experiences second reversal in farmgate prices due to global developments
Ghana’s cocoa industry, one of the world’s largest, has faced significant challenges over the past few years due to a range of global developments. These challenges have included the depreciation of the Ghanaian cedi (GH¢) against the US dollar, which has led to a reversal of farmgate prices for cocoa in the country.
This trend was noted in the March 2023 Cocoa Market Report by the International Cocoa Organisation (ICCO), which revealed that Ghana’s farm-gate prices in US$ nominal terms had been higher than those of its neighbor, Côte d’Ivoire, for the past five mid-seasons. However, this trend was reversed during the mid-crops for the 2021/22 and 2022/23 seasons, due mainly to the substantial depreciation of the cedi against the US dollar.
Despite these challenges, Ghana’s cocoa industry has made significant strides in boosting its cocoa production over recent years. Several initiatives have been implemented to support the industry, including the Cocoa Farmers Pension Scheme, the Cocoa Rehabilitation Programme, and the Cocoa Disease and Pest Control Programme. These initiatives have helped to increase Ghana’s cocoa production, which surpassed that of Ivory Coast over the half-year 2022/23 crop season, according to the ICCO report.
As of 31 March 2023, cumulative arrivals of cocoa beans in Ivory Coast were lagging behind previous season levels, while the volumes of graded and sealed cocoa beans purchased in Ghana since the start of the 2022/23 season were reported at 566,846 tonnes; representing an 18 percent increase from the previous year.
The cocoa industry in Ghana has been hit hard by the COVID-19 pandemic, low commodity prices, and the country’s debt burden. This has resulted in the depreciation of the cedi against the US dollar, which has affected the industry’s performance. The cedi endured a torrid 2022, ending the year as the fourth worst-performing currency globally and trading at a mid-rate of GH¢11.60 /US$ (YTD loss of 44.05%).
The local unit suffered from a raft of sovereign downgrades that dimmed investor confidence. Fitch and Moody’s ratings downgraded Ghana into negative outlook territory at the start of 2022, leading to a loss of access to the international capital market (ICM). The loss of access to the ICM posed some risks to international reserves and the country’s ability to meet external financing obligations.
Despite these challenges, Ghana remains committed to supporting its cocoa farmers and improving the industry’s performance through various initiatives. However, the reversal of farmgate prices in the past five mid-seasons is a concern. The ICCO report shows that the situation is largely attributed to the global economic challenges that have affected Ghana’s currency. It is hoped that with the right support, Ghana’s cocoa industry will bounce back and continue to play a vital role in the global cocoa market.
The current state of play in the global cocoa market is subject to change as the mid-crop progresses. However, the ICCO report has highlighted the significant development that Ghana has overtaken Ivory Coast in cocoa production. This development has significant implications for the global cocoa market and could lead to changes in the dynamics of the industry.
The cocoa industry will face significant challenges as it seeks to navigate the global economic challenges that are affecting the industry, but with the right support, however, Ghana’s cocoa industry could continue to grow and thrive in the years ahead.
