As the world’s second-largest cocoa producer, Ghana accounts for more than one-fifth of the global cocoa market. The commodity is a crucial export earner and contributor to the country’s economy. After a bumper harvest last season, the country is now looking to develop the segment, increase yields and diversify into growing markets.
The cocoa sector indirectly supports nearly 17% of the population and represents 11.5% of agricultural GDP, with the country earning $939.8m from cocoa exports in the first three months of 2012, according to preliminary data from the Bank of Ghana (BOG), the country’s central bank. The country achieved a record crop of 1bn tonnes in the 2010/11 season, which ended in October 2011.
Ghana’s cocoa regulator, the Cocoa Marketing Board (COCOBOD), a state-owned entity, reported that Ghana had produced 720,000 tonnes between October 2011 and early April 2012. This figure is down 5.8% compared with the same period of the previous season, but a dip following an excellent harvest is common in the sector. This recent growth, combined with instability in the Côte d'Ivoire, has recently made Ghana the world’s number-one producer of cocoa.
The country has also been affected by regional dry and windy weather, which impacted nearly three-quarters of global cocoa supply in 2011, according to international press reports. Given the effects of adverse weather on the region and rising international demand, the International Cocoa Organisation (ICCO) forecasts a 71,000-tonne shortfall in global supply this year. As a result, cocoa futures prices have risen.
Ghana’s cocoa sector is split into two annual “seasons”: the first runs from October to May, and most of what is produced in this period is exported; the second, which focuses on lower-quality “light crop”, runs from June to September. Production from this period is mainly sent to Ghanaian grinders at low prices. Late rains this year may lead to lower output for the light crop. Though it seems unlikely that Ghana will hit its 870,000-tonne target for the first crop, output is good, given the circumstances. The ICCO forecasts production of 970,000 tonnes for the full season.
But with foreign demand looking set to outstrip supply, the COCOBOD is investing in upstream cultivation to increase yields and reduce output volatility.
Several initiatives are now underway to help Ghana reach its goal. One such initiative will substitute older trees for hybrid, high-yield replacements. To this end, 20m free seedlings were distributed to cocoa farmers under the 2012 budget, according to the local press.
Other initiatives include rehabilitating old, abandoned and derelict farms, supplying fertiliser and providing assistance with pest control. Cocoa farmers are also now considering an increase in the use of pesticides, which are less widespread than in the Côte d'Ivoire. Finally, COCOBOD recently held a national workshop to increase awareness of the effect of climate change on the sector.
In line with the broader policy of moving the sector further up the value chain and reducing dependence on commodity exports – and thus reducing vulnerability to their price fluctuations – the government has also set the target of processing 60% of cocoa locally and discussions are ongoing to determine incentives for foreign companies. Currently only 20% of output is processed into products, such as cocoa butter, cake and liquor.
Kojo Amoo-Gottfried, the managing director of Cargill Ghana, the local subsidiary of the US-headquartered conglomerate, told OBG, “The government has made it very clear that it wants to increase the weight of value-added activities in the sector,” he said.
Amoo-Gottfried noted a few factors that could strengthen Ghana’s competitive advantages in cocoa. These include better transportation and logistics infrastructure and lower energy costs, which he said would make the market function more efficiently. Technological advances such as the recent GPS mapping of more than 1000 cocoa farms in the Central Region, which will provide precise measurements of farms and enable families to better plan and manage their produce, should help in this regard.
Jean-Marc Anga, the executive director at ICCO, said he is “very optimistic” about demand for cocoa, as well as by-products, given the growing demand in emerging markets such as China and India. Diversifying into new markets, as well as increasing cocoa consumption at home, is crucial for Ghana, which currently exports around three-quarters of its cocoa to established markets, including the UK, Japan, Germany and Switzerland.
“China is a growing to become one of the great chocolate consumption markets, as are other major emerging markets like Brazil and Russia,” Amoo-Gottfried said. “This growth in consumption of cocoa in emerging markets is very important, as we have been seeing a slowdown in consumption in the European markets because of the current economic situation.”
While much attention has focused on Ghana’s nascent oil industry of late, its cocoa sector, one of the world’s biggest for several decades, continues to be one of the largest employers and a primary revenue earner for the country. However, to ensure this sort of performance is sustainable, Ghana will need to improve local processing incentives and strengthen cultivation techniques over the medium- to long-term.