Cocoa prices & politics in Ghana & Ivory Coast

While a sober review of the facts—paramount among these the weakness observed for cocoa futures—would conceivably support Ghana’s move to leave the cocoa farmgate price for the 2018/19 main crop unchanged from last season, grandstanding and political posturing on the decision is currently ubiquitous. Members of opposition parties are not shy in suggesting, for example, that a 5 percent hike was warranted this season, pointing out that while the price is unchanged, Cocobod is planning to cut back on the provision of inputs like fertilizer. Presidential hopefuls are not averse to promising ever-rising payments for growers with the 2020 election ahead.

Neighboring Ivory Coast, of course, did raise its own farmgate price by around 7.1 percent, though it should be noted that unlike Ghana, Ivory Coast did not raise its price floor last season. As of last week’s trading, the 2018/19 farmgate price in Ghana is equivalent to about US$1.54 per kg, up about 18 percent from the farmgate price of US$1.31 per kg in Ivory Coast. (For comparison, prices last month in Cameroon were reported around US$1.65 per kg.) Ivory Coast’s CCC will reinstitute a 1.5 percent fee for growers on insurance and freight costs that had been lifted a few years ago.

Some Ghanaian grower groups have suggested that the price will drive out some farmers, and there have been threats of a production stoppage. The existing price differential is lower than it was last season, so theoretically this should be slightly less of an incentive for the smuggling of beans from Ivory Coast to Ghana. The two neighboring countries touted their joint announcement as a step forward in their cooperation on cocoa.

After negotiation with Ghanaian authorities, shippers have agreed to a 10 percent cut in freight for the country’s cocoa, reports GNA, though there are likely to be hikes elsewhere, such as adjustments due to mounting fuel costs and volatility.