Ghana is set to significantly increase the price paid to its cocoa farmers for the upcoming 2024/25 season, according to two anonymous sources familiar with the matter. This decision is expected to bolster the incomes of local farmers and reduce the smuggling of cocoa beans out of the country.
As the world’s second-largest cocoa producer, Ghana is raising its state-guaranteed farmgate price by nearly 45%, a move that reflects ongoing efforts to support its agricultural sector.
The farmgate price for the 2023/24 season was increased by over 58% to 33,120 cedis ($2,123.08) per metric ton, or 2,070 cedis per 64 kilograms. This adjustment was made in April for the remainder of the current crop season, marking a significant shift in the compensation strategy for cocoa farmers. The price hike came on the heels of a similar move by Ivory Coast, the world’s top cocoa producer, which raised its own farmgate price to 1,500 CFA francs (approximately 40 cedis) per kilogram for the mid-crop period from April to September 2023. This represented a rise from the previous season’s 1,000 CFA francs.
One source revealed that Ghana’s cocoa producer price review committee has proposed a new price of 48,000 cedis per metric ton, equivalent to 3,000 cedis per 64 kilograms of cocoa, for the 2024/25 season, which begins later in September. This increase represents a near 45% rise from the current pricing, reflecting the government’s determination to provide more favorable conditions for local cocoa farmers.
This proposal is now with the Ghanaian cabinet, awaiting approval. However, both sources believe the cabinet is unlikely to alter the committee’s decision, as raising the price beyond the proposed 48,000 cedis per ton could push Ghana’s cocoa marketing board, Cocobod, into financial deficit. One source also emphasized the necessity of maintaining price alignment with Ivory Coast’s yet-to-be-announced 2024/25 farmgate price. The two countries, which together account for over 60% of the world’s cocoa supply, have implemented a joint initiative to coordinate their farmgate prices and cocoa supplies to stabilize the sector and increase farmers’ incomes.
This year, cocoa prices have remained buoyant due to various challenges, including diseases and adverse weather conditions affecting crops in both Ghana and Ivory Coast. These difficulties have led to a third consecutive global cocoa deficit. The International Cocoa Organization (ICCO) recently revised its forecast for the 2023/24 global cocoa deficit, raising it from 439,000 tons to 462,000 tons. This puts the market on course for a 45-year low in the stocks-to-grindings ratio, highlighting the ongoing challenges in meeting global demand.
Cocobod initially planned to start the 2024/25 season on September 1, earlier than usual, with a reduced production target of 650,000 tons. However, both sources have indicated that the season’s opening will now be delayed. The original plan to commence earlier was intended to help curb the smuggling of cocoa beans, a practice driven by low prices and delays in payments to farmers. However, with the upcoming price hike, it appears the government has reconsidered its approach.
The prospect of higher earnings has created a stir among cocoa farmers and licensed buyers in Ghana. There have been accusations of both parties hoarding beans in anticipation of the new season’s proposed price increase. This behavior underscores the impact that pricing decisions can have on the cocoa market, influencing not only economic activity but also the practices and strategies of various stakeholders.
The upcoming price adjustment will align Ghana more closely with its neighboring Ivory Coast, creating a unified front in the global cocoa market. This coordinated approach aims to ensure fair compensation for farmers while also stabilizing cocoa supplies, which are critical to sustaining the industry’s long-term health and viability.
The new pricing strategy demonstrates Ghana’s commitment to addressing the financial challenges faced by its cocoa farmers. By increasing the farmgate price, the government aims to enhance the livelihoods of those at the heart of its cocoa industry, ensuring that they receive a fair return for their labor and helping to mitigate the risks associated with cocoa smuggling.
Looking ahead, all eyes are on the official announcement from the Ghanaian government. Once the cabinet’s decision is made public, it will clarify the new terms under which Ghana’s cocoa farmers will operate in the 2024/25 season. The forthcoming pricing details from Ivory Coast will also be crucial in determining the regional strategy and alignment between the two leading cocoa producers.
As both countries navigate the complexities of the global cocoa market, the emphasis remains on securing fair pricing for farmers, maintaining a steady supply of cocoa, and meeting the challenges posed by fluctuating global demand and environmental factors. This collaborative approach aims to strengthen the resilience of the cocoa sector and support the livelihoods of millions of farmers who depend on it.
