Cocoa has long been one of Ghana’s primary exports and is an important source of livelihood in rural communities. Ghana produces, on average, 800,000 tonnes of cocoa annually and with an average output of around 1.8m tonnes per year, is the world’s second-largest exporter after Côte d’Ivoire. In 2014 Ghana’s exports amounted to $10.2bn, of which cocoa and its derivatives made up approximately 28%.
Between 2000 and 2012, Ghana increased its production from 450,000 tonnes to 1m tonnes. During the 2014-15 season, heavy rainfall, severe harmattan winds and disease led to a disappointing harvest that produced only around 740,000 tonnes. This was well short of the country’s initial estimate of 1m tonnes and led to Ghana’s inability to fulfil a number of its sales contracts. However, the industry seems to be rebounding. In the 2015-16 growing season, Ghana produced 840,000 tonnes of cocoa, just shy of the 850,000 to 900,000 tonnes projected. Government investment in programmes to improve productivity and the slow stabilisation of the cedi should benefit the sector moving forward.
Growing Cocoa
Cocoa has two growing seasons in Ghana. The main season runs from October to May and produces 80% of the annual harvest while the light season runs from June through August. There are six cocoa growing regions in Ghana including the Ashanti, Brong-Ahafo, Eastern, Volta, Central and Western Regions. The Western Region is responsible for over 50% of the country’s production.
There are approximately 800,000 cocoa farmers in Ghana, and the livelihoods of millions of additional Ghanaians depend indirectly on the industry. Despite having similar amounts of cocoa-producing land – 1.7m ha – Côte d’Ivoire’s annual cocoa harvest has risen to 1.8m tonnes while Ghana’s seems to be slowly decreasing. A contributing factor to this difference is Ghana’s significantly smaller-scale farms, very few of which are larger than 20 ha. Most farmers operate rain-fed fields employing traditional methods that rely on manual labour.
Market Structure
After the harvest, farmers transport their cocoa to local buying centres where they sell their product to one of approximately 26 licensed buying companies (LBCs). The LBCs transport the product to port where they sell it to the Ghana Cocoa Board (COCOBOD) which exports it through its subsidiary, the Cocoa Marketing Company. LBCs receive a commission on every kilogram they deliver and are incentivised to secure high volumes.
According to Ecobank, only 12 of the 26 registered LBCs control approximately 98% of purchases. According to the Food and Agriculture Organisation of the UN (FAO), “There is almost no competition among Ghanaian cocoa farmers as buyers are readily available and prices are fixed; rather, competition is more important among LBCs that have to reach a threshold volume to be able to export.”
Ghana is the only cocoa producing country that has a controlled marketing system. The industry is regulated and managed by the government-controlled COCOBOD, which has built a global reputation for ensuring high-quality cocoa beans and products. COCOBOD and its subsidiaries set the price of cocoa and implement government policies and programmes related to cocoa and other select cash crops. It has exclusive rights for exporting cocoa.
At the beginning of each growing season, COCOBOD uses forward contracts to set the price of the next season’s crop. To protect farmers from price volatility, they attempt to establish a price floor at 70% of the world market price. Eddy Nartey, financial controller at cocoa and chocolate manufacturer Barry Callebaut Ghana, told OBG, “COCOBOD helps the industry because it ensures the quality of the beans. They make sure that before they arrive at factories, they are cleaned and are of a high quality. The downside is that they have a monopoly, which leads to a lot of bureaucracy. Sometimes you don’t even know how much crop you have in your warehouses.”
Policy Priorities
In December 2015 COCOBOD published the Cocoa Sector Development Strategy II (CSDS II) to review the performance of the sector and outline policy priorities for coming years. According to the FAO, as of 2011, Ghana’s cocoa yield averaged 25% less than the world’s other top producers and 40% less than neighbouring Côte d’Ivoire. The CSDS II states that one of COCOBOD’s priorities is to increase yields from 450 kg per ha to 1000 kg per ha in the next 10 years and increase production to 1.5m tonnes. COCOBOD also intends to work with the private sector to ensure timely delivery of and access to pesticides. The CSDS II states that this will occur through the establishment of privately owned “spraying gangs” who will begin offering services in 2017.
Older trees and the use of antiquated seeds also inhibit productivity. Estimates suggest that 70% of seedling stocks on farms in Ghana are of an older species that cannot survive erratic weather patterns or the effects of climate change. To ensure all farmers have access to more productive seedlings, COCOBOD announced it was increasing its distribution of hybrid seedlings from 50m to 60m. Nartey told OBG, “The government is working a lot on increasing yield. In late 2015, COCOBOD started providing high yield seedlings for hybrid trees. Once these trees have been given some time to mature, many farmers might double their output.” Hybrid seeds are able to produce all year round while old varieties only produce during certain times of the year. Finally, COCOBOD has also increased the distribution of free fertiliser until 2017, at which point the programme will be replaced with private sales of recommended inputs.
Infrastructure
In addition to policies for increasing production, the government is also working to improve logistics infrastructure in the sector. Patrick Paintsil, columnist at the Business & Financial Times, told OBG, “Transportation is a big challenge and farmers have a hard time moving their cocoa beans. Cocoa is mostly produced in the hinterlands so the farmers have to bring it to collection centres in the city to sell it but the roads between the two areas are very bad.” Over 90% of freight in Ghana is transported by roads and yet in many cocoa growing regions, especially in Western Ghana and Brong-Ahafo, roads are so dilapidated they often cause heavy backups or are completely impassable. These challenges increase costs for farmers and risk compromising the quality of the cocoa beans. In 2015 COCOBOD announced the Cocoa Roads Rehabilitation Project (CRRP), which will focus on constructing or renovating major roads connecting cocoa buyers with buying centres to ease transport of cocoa beans. According to local media, 628.7 km of roads have been earmarked for construction, with the first phase of the project under way in the Eastern Region. Implementation of the CRRP is expected to cost $150m annually for the next five years and is being funded by COCOBOD. While the vast majority of freight in Ghana is transported by roads, railway has been shown to be a significantly more affordable, efficient and durable way to move bulk cargo from the hinterlands to the country’s ports. However, due to the poor condition of Ghana’s railway network, all cocoa is currently transported by roads. COCOBOD intends to work with the Ghana Railway Development Authority to rehabilitate the country’s rail system — especially the Western Corridor — to improve the transport of Ghana’s cocoa.
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