(Bloomberg) -- Ghana will raise the amount it pays cocoa farmers by 45%, falling short of the level sought by the industry regulator, as the world’s second-largest producer of the beans has yet to secure vital funding for the new season.
Growers of the chocolate-making ingredient will receive 48,000 cedis ($3,063) per ton in the 2024-25 season that the nation started on Sept. 1, a month earlier than usual. That equates to 3,000 cedis per 64-kilogram bag, versus 2,070 cedis in the latter part of last season, Bryan Acheampong, Minister of Food and Agriculture said.
The price is below the 54,656 cedis per ton that Bloomberg reported the Ghana Cocoa Board was negotiating with the government in order to control smuggling of the beans to neighboring markets. The regulator wanted to match an expected increase in prices in top producer Ivory Coast, where the season begins Oct. 1.
“We don’t expect a significant hike in prices from Ivory Coast,” Acheampong said. “The severe highs and lows of cocoa prices are indicative of a market and sector that requires careful analysis before making pricing decisions.”
Ivory Coast’s better prices and more stable exchange rate have been a draw for Ghanaian farmers as they seek to take advantage of high global prices. Harvest shortfalls in West Africa sent cocoa futures soaring to an all-time high earlier this year, topping $11,000 a ton. Better farmer pay could help to eventually ease the shortage and stem land loss and smuggling.
Ghana’s harvest has been falling over the last three years mainly due to bad weather, disease and a lack of fertilizers. Bean smuggling has compounded the problem. The Cocoa Board has trimmed back its output target for the current season by 20% to 650,000 tons due to the persisting adverse conditions.
The latest farmgate prices remain well below the international market and Ghana hasn’t yet benefited from the rally because most of its 2023-24 output was committed to contracts negotiated when prices were much lower. Those challenges have escalated as it struggles to reach a deal with foreign lenders for a new syndicated loan, casting doubt on how it will fund the season ahead.
For 32 years, Ghana has relied on the annual loan to pay for seedlings, chemicals, and fertilizer and buy cocoa farmers’ output. Although negotiations continue, officials have said the target has been cut to $600 million from $1.5 billion and Ghana aims to increase spot cocoa sales to benefit from high global prices.
(Updates to add smuggling concerns, additional comment from minister.)
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