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.
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 price 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.
Gov’t 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 on farmers.
Source: The Finder