Farm-gate cocoa prices in Ghana to rise

07-Sep-2008 - Last updated on 08-Sep-2008 at 10:34 GMT

Cocobod, the cocoa regulator for Ghana, has raised the fixed price it pays to farmers, a move that may not directly impact cocoa processors and buyers but could ultimately result in upward pressure on prices.

Ghana's finance minister announced last week that the price paid to producers would rise by more than a third for the 2008/09 season to GHC1,632 (€990) per tonne of cocoa beans, up from GHC1,200 per tonne (€728).

The move sets out to stem the flow of smuggled cocoa beans from Ghana into neighbouring cocoa producing country Ivory Coast.

"The price rise may not directly impact buyers, but perhaps it will put pressure on the cocoa board to sell cocoa beans at a higher price," Laurent Pipitone, senior statistician at the International Cocoa Organisation commented to ConfectioneryNews.com.

Although, he added, that clearly prices on the international global market will prevail for the buyers.

Africa grows the lion's share of cocoa used by the world's confectioners and food firms, with Ghana contributing 19 per cent of cocoa to the global market. Ivory Coast, the biggest global supplier, contributes 38 per cent of this much sought-after soft commodity to the marketplace.

Most of the cocoa cultivated in Africa is exported to the major centres of cocoa consumption in Europe and North America, with the Netherlands and the US maintaining their positions as the world's two leading cocoa processing countries.

In recent months, as demand pushed supply lines, the valuable cocoa bean crashed through the $3000 barrier in June, with prices soaring on the London and New York futures market. Since then, prices have slightly dampened with London futures closing on 5 September at £1540 (€1912) a tonne, and New York futures on the same day at $2626 (€1845) a tonne.

But these figures notwithstanding, as Laurent Pipitone points out, in the last 30 years, the price trend for cocoa is more downward. In the 1970s, prices flew, in constant terms, five times higher than today. An inflationary phenomenon spread over many commodities at the time.

While the price paid to cocoa growers in Ivory Coast marches in tune to the world market, in Ghana prices are fixed at the beginning of the season.

Attracted by the higher prices, and the keen price differentiation, smugglers from Ghana have been selling their produce on Ivory Coast. According to the International Cocoa Organisation, this is not a rare phenomenon. "Smuggling is a common problem in all of western Africa," an ICCO spokesperson recently said to ConfectioneryNews.com.

But one that robbed Ghana of record figures. "I can say for now that we are denied that opportunity of announcing a record harvest this year as a result of the smuggling," Isaac Osei, COCOBOD's chief executive said recently.

With cocoa beans in June 2008 fetching a 40 per cent higher market price than in June 2007, the appeal to smuggle has apparently been ever stronger this year.

But with the farm-gate price lifted by 36 per cent, the Ghanian government will hope to cut the majority of illegal cocoa bean flows into Ivory Coast.

Indeed, Cocobod further announced last week that it had closed the light season with immediate effect, adding that the upcoming main crop season would open in mid-September, rather than as usual in October.

The decision to close the season earlier may also have been linked to the drive to stem the smuggling, opening the new season, with the higher farm-gate price as soon as possible, could curb the appeal of selling elsewhere.