A key pillar of agricultural and export activity in Ghana, cocoa is the most important and valuable crop grown in the country. Vying with Côte d’Ivoire for the title of world’s largest cocoa producer, Ghana has seen phenomenal growth in its cocoa industry since national hero Tetteh Quarshie introduced the crop in the 19th century. Today, cocoa is one of the largest employers and industries in Ghana, and the country has a solid global reputation for producing high-quality beans.
DRIVING GROWTH: Cocoa contributes 63% of foreign exchange earnings from Ghana’s agricultural sector, and employs some 3.2m workers, including small-scale farm families, farm owners and service providers. Exports in Ghana grew by 9.5% in 2012, led largely by gold and cocoa, according to the Ghana Statistical Service, and cocoa exports jumped 6.7% in 2012 to $2.83bn. The main markets include the US, Europe, Asia, Brazil and South Africa.
Nevertheless, a number of challenges face the industry. While 2011 was a bumper year for cocoa crops, problematic weather caused production to slide in 2012 and 2013. The government-owned Ghana Cocoa Board (COCOBOD) has kept its fixed prices high, and with stakeholders sharing a shrinking slice of the pie, the board has been finding it difficult to maintain profitability in recent seasons. Pest and disease threats remain a concern for many farmers. However, government expenditure on new improvement programmes have had a positive impact on yields, and the first harvest of the 2013 season exceeded expectations, stirring hope that crops could outperform projections by the end of the year.
CENTRALISATION: Under the portfolio of the Ministry of Finance (MoF) – rather than the Ministry of Food and Agriculture (MoFA) – cocoa is distinct in many ways from other agricultural segments. The country has created a centralised, regulated market for beans and cocoa products under the auspices of COCOBOD, and prices are fixed by the government. This is due to the size and importance of the cocoa industry to Ghana’s economy; price-fixing helps stabilise the sector, according to the government, and protects farmers from the volatile world market.
There are 26 licensed buying companies able to purchase cocoa directly from farmers in Ghana. Prices are set in October each year by COCOBOD, and have been increasing despite a slump in world prices. While this has created challenges for the board and associated stakeholders, farmers have benefitted from the government’s commitment to keep production profitable. The industry thrives on small-scale farm production, which assures higher quality control and employment for millions. Though agri-business and basic processing activities could benefit from largescale operations, the present model is still beneficial for both farmers and international buyers.
Ghana operates a two-cycle cocoa year, consisting of a 33-week main crop from October to June, which is mainly exported to Europe and Asia, and an 11-week minor light crop in late summer, discounted to local processing firms including the state-owned Cocoa Processing Company (CPC).
Record-breaking output of 1m tonnes, combined with political unrest in Côte d’Ivoire, pushed Ghana into the top slot as the world’s largest producer in 2011.
However, production slipped to 864,403 tonnes in 2012, much lower than the government’s 950, 000-tonne target, due to irregular weather conditions.
WET WEATHER: Weather woes continued into 2013, when rainfall patterns in the Western Region – home to around 55% of Ghana’s cocoa production – were poor, raising fears of low production. Output was projected to slip further, reaching only 800,000 tonnes for the year. However, early results show production has so far outperformed projections aided by improved precipitation. Indeed, by June 2013 cocoa purchases had exceeded expectations, with the main harvest reaching some 755,446 tonnes, although this could also be partially attributed to an influx of beans smuggled in from Côte d’Ivoire where prices are lower.
Analysts had projected the main crop to reach 730,000 tonnes, and Reuters reported that the country’s total crop could hit 900,000 tonnes if current weather conditions continue. The light crop season, which opened July 4, is projected to see 70,000 tonnes in output, meaning Ghana’s total in 2013 is likely to exceed its 800,000-tonne target.
PRICE REBOUND: The global cocoa sector has seen a surplus for the past two seasons, which has helped prices on the terminal market cool from a 33-year high of $4080 per tonne in 2010. In 2012 cocoa prices dropped 10% to $2375 per tonne due to a world surplus. Prices have rebounded somewhat in 2013, and stood at $2425 as of May, according to the International Cocoa Organisation. Prices are set to go up next year, as the world markets are projected to experience a shortfall of 178,000 tonnes in 2013/14.
In 2013 COCOBOD bumped prices up 3.4% from GHS3280 ($1686) per tonne to GHS3392 ($1744) per tonne, about 78.36% of the free on board (FOB) price, and reduced the export tax. By law, the price must be set to at least 70% of FOB, but setting prices at 78.63% of FOB has created financial constraints for other cocoa stakeholders, despite being good for farmers.
“When the world market price goes down, we cannot reduce what we pay to the farmer, so we are left sharing that 20% between many stakeholders. Obviously, that affects us very seriously because our projections are thrown overboard; it affects our finances. So this year is very hard for us,” Godfried Oduro-Baah, research manager at COCOBOD, told OBG.
Part of the reasoning behind inflated COCOBOD prices is thought to be the 2012 election season, when it would have been extremely unpopular to lower producer rates. “Cocoa prices have been dropping, but it was simply not an option politically to reduce prices. This has created the expectation that cocoa prices cannot be reduced,” said Amit Agrawal, senior vice-president for West Africa at Olam, one of the largest licensed cocoa buying companies in Ghana.
FOREIGN INVESTMENT: Private sector investment has seen solid growth in recent years, with multinationals entering the market at all levels of the value chain. Cargill opened a $100m cocoa processing facility with an annual capacity of 65,000 tonnes in 2008, and Archer Daniels Midland followed with its own 75,000-sq-metre processing facility in 2009. According to the Ghana Investment Promotion Centre, the Transmar Group invested GHS78.3m ($40.3m) into cocoa processing in 2012, and GC Resources, a Canadian company, invested GHS25.3m ($13m) to produce potassium chloride from cocoa husks.
FIGHTING DISEASE: Cocoa production continues to face challenges from the Cocoa swollen shoot virus (CSSV), black pod disease and capsid infestations, which have cost farmers millions in the past decade. Black pod disease, a fungal infection that causes beans and pods to rot, is a major threat to world cocoa production, affecting 450,000 ha of land in West Africa annually. CSSV is a disease which causes defoliation, yield reduction and ultimately tree death. It spreads quickly and can destroy a young cocoa farm in 18 to 24 months, according to COCOBOD. Capsids are the worst cocoa pests in Ghana; they feed on cocoa tree sap, injecting toxic chemicals and destroying tissues as they do so. According to the CCSV and Disease Control Unit (CSSVDCU), capsid infestations result in crop losses of up to 30% per year in some areas.
COCOBOD established the CSSVDCU in 1994 to combat pests and disease. Operating from 41 districts throughout all six of Ghana’s cocoa growing regions, the unit is responsible for removing and destroying infected trees and supplying farmers with disease-resistant hybrid seeds for replanting.
In 2001 the government also launched two key technology-based intervention programmes to combat the effects of pests and disease: the Cocoa Pest and Disease Control (CODAPEC), which aims to mitigate risks through prevention programmes and tree removal, and Cocoa High Technology (Cocoa HighTech), which strengthens productivity through better land use and the proper application of fertiliser.
The programmes have seen success so far; when reporting its record-breaking 1m tonnes of production in 2011, COCOBOD attributed some of its feat to the CODAPEC and Cocoa High-Tech programmes. In 2013 CODAPEC received funding of GHS44.9m ($23.1m), with GHS9.7m ($4.9m) allocated for CSSV control programmes. The Cocoa High-Tech programme received GHS50m ($25.7m) in funding in 2013.
HIGHER YIELDS: According to Oduro-Baah, COCOBOD’s seed production unit has also developed new high-yield hybrid seeds that are resistant to pests and disease, with distribution to local farmers due within the next three to four years. “This is expected to increase yields by as much as 100%, which is something we are obviously quite excited about,” he said.
Though growth has been hampered by falling international prices and the challenge of disease and pests, the government has taken strong measures to improve the wider growing climate for Ghana’s cocoa farmers.
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