Ghana’s governing cocoa body, Cocobod has unveiled a new price structure for its core crop, dramatically reducing farm gate pay prices, amid a ‘gross mismanagement’ crisis at industry level that has left sector agricultural workers unpaid for months, reports Neill Barston.
The deal, which was concluded following an emergency government meeting on Wednesday, comes after farmers unions issued a plea to authorities to settle payment arrears, which have, according to local reports, left many communities struggling to function.
As previously reported, Cocobod – which has claimed the rates are now in-line with global prices, had in fact raised farmer pay in October of last year, in-line with neighbouring Ivory Coast, when markets had been in a more buoyant position, with prices being set at 58,000 cedis a tonne ($5,300), but owing to currency being paid in equivalent US dollars, many communities highlighted the fact they barely noticed any upturn in payment due to the poor exchange rate values being fetched.
Steep cocoa price decline
With global cocoa prices declining rapidly over the past two months, to rates below $4,000 a tonne, Cocobod, has just announced a new rate of 41,392 cedis per tonne, amounting to around $3,580 in dollar terms, representing a drastic cut of more than 25% less for farmers – which has itself prompted considerable concern within agricultural communities. As reported locally by Cocoa Media Hub, farmers have urged a review of the decision.
Their concerns have centred on the uncertainty remains over whether the government-backed Cocobod organisation will honour outstanding payments to farmers at the previously agreed, higher rate, which farmers unions have called on them to deliver.
As reported by CNBC Africa, finance minister Cassiel Ato Forson stated that the present crisis conditions had stemmed from a lack of buyer engagement.
He said: “The current situation is largely driven by the unwillingness of buyers to purchase Ghana’s cocoa because it has become uncompetitive and very expensive,” reportedly confirming that the government had instructed Cocobod to repay farmers what they are owed.
As previously reported earlier this week, the government acknowledge that wider restructuring of the industry was required – which includes processing more cocoa at source. Presently, it is believed that around 30% of crops are fully processed in the country, which it will now target a volume of 50%, ensuring more financial value is kept at source.
The government has reportedly also indicated that new finance models will be put in place to deal with the market, linked to domestic bonds, with repayments pegged to same-crop year performance.
National Chocolate Day
Notably, the announcements came just ahead of what is celebrated as National Chocolate Day on 14 February in Ghana, under the banner of “Love & Cocoa Month,” which the nation’s tourist authority hopes will assist artisans and boost visits to the region.
Notably, in a statement issued earlier this week, Cocobod stated earlier this week, the organisation asserted that ‘cocoa was now selling at prices significantly lower than the producer price of Ghana’.
Significantly, the body also claimed that a review of the sector over the past eight years had found ‘gross mismanagement immediate and comprehensive reforms to address the challenges in the sector,’ which the first action being ensuring payment of farmers.
According to the trade body, which acknowledged that it had suffered liquidity issues in the past 18 months, a new Cocobod Bill will be presented to Parliament to implement an automatic adjustment of producer price to align with movement in the world market price, exchange rate, and other key variables and guarantee a minimum of 70% of the gross free on board price to be paid to cocoa farmers.
As the organisation noted, the previous model of syndicated loans that had operated over the past three decades had failed to work in the present year, with the system reliant on buyers willing to pay pre-agreed prices for crops, regardless of subsequent market conditions – which have worsened considerably in recent months.
Confectionery Production approached Cocobod earlier this week for comment on the story, but as yet, no response has been received.