The crop is a leading contributor to the national economy

As the world’s second-largest producer of cocoa – behind only its neighbour Côte d’Ivoire – Ghana’s agricultural output and overall economy are dependent on production of the crop, which represents 57% of the sector’s export earnings and over 20% of total export earnings, and employs more than 800,000 farmers.

Adding Value

Cocoa exports are sent mainly to Europe, but growing demand in Asia has led the government to refocus its strategy. Following the 2012/13 season, 19.9% of cocoa exports were Asia-bound, mainly to Malaysia, Japan and China. Bulk raw cocoa beans account for over 80% of the industry’s exports. The remainder consists of semi-processed and processed products such as cocoa butter, paste, powder and husks.

The government is promoting local value addition to the cocoa supply chain to create employment, and the Ghana Investment Promotion Centre is highlighting agribusiness opportunities as a key investment area. The government target for local cocoa processing is 40%, according to Ghana’s Cocoa Board (COCOBOD).

COCOBOD is the marketing board operated under the auspices of the Ministry of Finance. It is the only entity with the authority to export cocoa from Ghana, and it sells the majority of expected cocoa yields through the commodity futures markets before harvest. To protect farmers from volatility in the international commodities markets, COCOBOD guarantees a minimum of 70% of the world market price for cocoa.

COCOBOD sets prices in October each year, after which 26 licensed buyers are able to purchase the cocoa. In 2014 the price was set at GHS350 ($133) per 64-kg bag. The aim is to encourage farmers to view the cocoa segment as a good business opportunity and that COCOBOD’s minimum price setting is helping make the segment more sustainable.

Top Crop

The year is divided into two crop cycles: the main crop (33 weeks between October and June) and the light crop (over the summer). The main crop is mostly exported, while the light crop is discounted for local grinders. The average annual amount of cocoa purchased by COCOBOD is around 800,000 tonnes. The 2011/12 season saw a record purchase of 1.05m tonnes for the main crop cycle, but irregular weather conditions in 2012/13 caused a decline to 770,292 tonnes in the main crop and a total harvest of 835,466 tonnes. Better weather has led to a positive forecast for 2013/14; COCOBOD documented cocoa purchases to May 1 at 750,122 tonnes, up 17% on the same period of the previous year (638,654 tonnes).

According to the Business & Financial Times, total purchases for the 28th week of the main crop season increased to 17,170 tonnes from a weekly average of 10,000 tonnes during the prior three weeks. The improved weather and new farming projects are responsible for the increased yield, according to COCOBOD spokesman Noah Amenyah. “We can cross 850,000 tonnes this season,” he said at a press conference, referring to the 2013/14 main crop. Estimates in June 2014 suggested that output will surpass 900,000 tonnes, according to Bloomberg.

Southern Belle

Ghana’s Western Region – bordering Côte d’Ivoire’s main cocoa-producing zone – leads in terms of yields, and is responsible for more than half of national output. The region is divided into four zones: Northern, Eastern, Southern and Western. Historically, Western North has produced the most cocoa, but due to changing weather patterns, the largest main crop yields in 2014 were in the Southern zone. By week 23 of the 2014 main crop season, Western North was producing 168,824 tonnes, while Western South’s output was 186,960 tonnes, according to COCOBOD.

The government is responsible for subsidising about half the cost of fertiliser under its subsidy programme for cocoa farmers, which is widely credited with boosting output from 400,000 to 800,000 tonnes over the past decade. However, as cocoa prices fell on the world market in 2012 and 2013 – staying below $2500 per tonne through the main crop of 2013, while COCOBOD calculates its budget based on a price of $3000 – the government decided to phase out the subsidy. Shortly thereafter, due to low prices and a lack of adequate materials, farmers began to voice their concerns.

Then in May 2014 COCOBOD shifted its position and announced that it would provide free distribution of fertilisers to farmers. According to COCOBOD’s CEO, Stephen Opuni, the government will finance $200m worth of farming inputs, particularly chemicals and fertilisers. Greater output and higher cocoa prices in 2014 – prices have increased to more than $3000 per tonne since May and are expected to continue to rise – have supported the government’s decision.

Financial Challenges

However, the benefits of the fertiliser programme in terms of boosting Ghanaian exports have been somewhat diminished as higher prices for cocoa in neighbouring Côte d’Ivoire have prompted farmers to look across the border for profits. The smuggling of cocoa beans between the two top producers has been occurring for some time, though beans were typically smuggled from Côte d’Ivoire into Ghana. The recent devaluation of the cedi, however, has led to a reversal of the smuggling route.

According to Reuters, the cedi has fallen 23% against the dollar in 2014, whereas the euro-pegged CFA in Côte d’Ivoire has remained constant. The result is a farmer price that is 24% higher in Côte d’Ivoire than in Ghana, making the former’s export market more attractive to Ghanaian farmers and spurring cross-border smuggling in that direction. Between 60,000 and 100,000 tonnes of beans were illicitly moved into Côte d’Ivoire from October 2013 to May 2014, according to Reuters.

Farmers are not the only ones in the supply chain facing financial concerns. Both the rising cost of borrowing and high inflation rates are having an impact on cocoa distributers too. Produce Buying Company (PBC), Ghana’s largest buyer of cocoa beans, recently announced it would borrow less money from COCOBOD, which is increasing its own borrowing to fund purchases, as evidenced by a $1.7bn loan signed with international banks in September 2014 for the next season.

Boosting Yields & Controlling Disease

New technologies have the potential to boost yields. For example, CocoaLink, a Hershey-sponsored farmer empowerment project, enables farmers to use text messages to stay up-to-date on the growing calendar. The programme released its three-year impact evaluation in March 2014, which reported it had registered approximately 45,000 Ghanaian cocoa farmers in 1800 communities. According to local media, 1.2m free text messages were sent during the programme, and CocoaLink farmers were able to increase their yields by as much as 46% over the initial three years of the project. Output was 10% higher compared to control Disease control remains a major challenge for Ghana’s cocoa production. According to COCOBOD, over 200,000 tonnes of cocoa was lost in the 2012/13 season due to black pod disease, a fungal infection causing rot in the beans. This represents around one-quarter of total output for the season. Other diseases and pest issues, such as cocoa swollen shoot virus (CSSV) and capsid infestations, are also common.

According to Franklin Manu, the executive director of the Cocoa Research Institute of Ghana, more than 2m cocoa trees were destroyed due to CSSV over the past several decades. The government has responded with various control programmes, such as the CSSV and Disease Control Unit, which provides farmers with newer hybrid seeds that are CSSV-resistant; the Cocoa Pest and Disease Control plan; and the Cocoa High More recently, COCOBOD agreed to a $400m public-private partnership with a group of stakeholders to fight black pod disease.Partners in the deal include Mondelez International, Mars, the Ghana Cocoa Growing Research Association and the Dutch embassy. The Netherlands is by far Ghana’s largest recipient of cocoa, importing 26% of its output, according to COCOBOD.

While challenges persist in Ghana’s cocoa industry, 900,000 tonnes of output is expected in 2014. New hybrid seed varieties, insurance schemes, monitoring services and free fertiliser are all helping to mitigate risk, improve farming efficiency and boost overall yields. example, CocoaLink, a Hershey-sponsored farmer empowerment project, enables farmers to use text messages to stay up-to-date on the growing calendar. The programme released its three-year impact evaluation in March 2014, which reported it had registered approximately 45,000 Ghanaian cocoa farmers in 1800 communities. According to local media, 1.2m free text messages were sent during the programme, and CocoaLink farmers were able to increase their yields by as much as 46% over the initial three years of the project. Output was 10% higher compared to control communities in the study.

Disease control remains a major challenge for Ghana’s cocoa production. According to COCOBOD, over 200,000 tonnes of cocoa was lost in the 2012/13 season due to black pod disease, a fungal infection causing rot in the beans. This represents around one-quarter of total output for the season. Other diseases and pest issues, such as cocoa swollen shoot virus (CSSV) and capsid infestations, are also common.

According to Franklin Manu, the executive director of the Cocoa Research Institute of Ghana, more than 2m cocoa trees were destroyed due to CSSV over the past several decades. The government has responded with various control programmes, such as the CSSV and Disease Control Unit, which provides farmers with newer hybrid seeds that are CSSV-resistant; the Cocoa Pest and Disease Control plan; and the Cocoa High Technology initiative.

More recently, COCOBOD agreed to a $400m public-private partnership with a group of stakeholders to fight black pod disease.Partners in the deal include Mondelez International, Mars, the Ghana Cocoa Growing Research Association and the Dutch embassy. The Netherlands is by far Ghana’s largest recipient of cocoa, importing 26% of its output, according to COCOBOD.

While challenges persist in Ghana’s cocoa industry, 900,000 tonnes of output is expected in 2014. New hybrid seed varieties, insurance schemes, monitoring services and free fertiliser are all helping to mitigate risk, improve farming efficiency and boost overall yields.

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The Report: Ghana 2014

Agriculture chapter from The Report: Ghana 2014

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