Ghana has upped farm gate cocoa prices by 63% to buffer low supplies, hinder smuggling and raise farmers’ hopes.
From this fall season, farm gate prices of cocoa beans will climb to 20,943 Cedi (GH¢) or $1,837 per tonne.
President Nana Akufo-Addo has also fast-forwarded the cocoa season to September rather than October, to help steer dwindling stocks.
This comes just a month after world cocoa prices came back to earth after a three-year high run, following news of the dissipation of El Niño rains. The weather lull momentarily levelled off prices. International fund buyers even booked Ivory Coast’s and Ghanaian cocoa at the then-lowered prices.
Why this abrupt price turnaround?
Reuters reported on September 9, 2023 that plummeting cocoa reserves at home due to smuggling across the border led to the government’s intervention. Black market hoarders have been crossing tons of cocoa beans into Togo via Ivory Coast, where price is still high.
The historical currency depreciation of the Ghanaian Cedi has made cocoa cheaper within Ghana than regionally, hence the hoarding.
Now that the price gap between the world’s biggest exporter, Ivory Coast, and Ghana has locked, future markets for cocoa bate their breath to see how the region reacts.
Cameroon raised its price by 25% to 1500 Cameroonian Francs or $2.45 per kg just before Ghana did the same.
2022-23 season comes round
Despite seeming sudden, a similar price reset also happened in October 2022 when the 2022-23 season began. The government had then set the price at Cedi 12,800 or $1,280 per tonne at 2022 exchange rates.
The above price for the 2022-23 season comes to roughly the same government-guaranteed one of September 2023, after adjusting for inflation. Consumer inflation in Ghana has risen dramatically by 43.1% since June, 2023. Inflation hit a 10-year high in late 2022 and early 2023, at 54.1%, driven by steep food inflation.
Cocoa bean retail prices in Ghana are not left out. The average price in August through September, 2023 has been $2.5 per kilogram but this has been rising to the $2.5-$3.5 per kilo frontier. The global average for a kilo on September 13, 2023 was between $2.97 and $3.03.
Rise and Fall behavior of Cocoa prices in 2023
Cocoa prices have had a wild run in 2023. The New York and London benchmark markets for premium ‘gold’ cocoa spiked in July to $3,426 a tonne. This was one of the highest in the past three decades.
By August, however, news of lessening rains brought prices back to normal. On August 16, 2023, cocoa bean prices dipped to $2.65 per kg in New York markets, down from $3.35 on July 4, 2023.
The price rise attracts bullish buying by multinationals but usually brings little improvement on the farmers’ lot. To curb this, Ivory Coast’s and Ghana’s governments introduced the Living Income Differential (LID) back in 2019. LID is a minimum living income wage, usually $400 per tonne above the industry’s price minimum. However, studies have shown that international buyers rarely add the $400/ton LID when buying cocoa directly from farmers.
Fears of poor performance for the 2023-24 crop across West Africa is the main reason for the cocoa bean price rebound once again. The Ghana and Cameroon price resets by their governments are just some of the finest examples of preparing for low supplies ahead.
Will this mean the cocoa world hasn’t seen the best of cocoa prices this year? Time will tell.