Halfway through the current cocoa season, concerns are rising that Ghana’s growers will see lower-than-expected revenues for 2013, due to poor weather conditions and a tight global market. However, the government still plans to move ahead with a long-term programme to further boost production, with hopes that a series of late rains will also improve output for the current season.
Although a number of African cocoa-producers have been hit by problematic weather and poor rainfall over this past year, Ghana’s government has sought to reduce the impact of climate volatility on output through a range of both short-term and long-term programmes, which target improved efficiency through support and extension services provided directly to farmers.
Reducing exposure to climate risk is a particular challenge for cocoa, since it relies heavily on smallholder farmers. As an incentive to increase production, the state-owned sole purchaser, the Ghana Cocoa Board (COCOBOD) raised the rate for the 2012/13 season by 3.4%, despite cocoa prices dropping internationally. Farmers currently receive GHS3392 ($1754) per tonne, which is 78.4% of the free-on-board (FOB) price. Ghanaian law requires COCOBOD to pay at least 70% of the FOB price.
In addition to providing technical training and fixing prices for output, other reforms include a programme that aims to deliver 20m hybrid seeds at no cost. The government also offers rehabilitation services for farms, such as replacing older trees, some of which are now over 30 years old.
Cocoa is a crucial element of the Ghanaian economy. It is the second-largest export behind gold and a key source of employment. Ghana was the world’s largest producer of cocoa in the 2010/11 growing season, surpassing neighbouring Côte d'Ivoire with a record harvest of 1m tonnes. Côte d'Ivoire took back the top spot the following year, however, as its economy returned to normal after several months of violence after a contested election in November 2010.
The main cocoa harvest takes place in June each year, following a growing season that lasts around seven months. A second, smaller harvest also occurs after a shorter growing season of about four months. The majority of the primary harvest is exported, while the second harvest is reserved for domestic production. Ghana’s output slumped to about 850,000 tonnes in the 2011/12 season, and the production target for 2012/13 is lower still, at 800,000 tonnes. Expectations have been subdued based on some early returns: by the beginning of November 2012 purchases were down 31% on the same period in 2011, according to COCOBOD.
There has been a silver lining on the horizon, however, as rainfall levels appeared to be on the rise by early March, with forecasts expecting between 40mm and 50mm of rainfall, though it was unclear whether this could make up for the poor start to the season.
Still, the increased rain may prove a mixed blessing as it pushed cocoa futures prices lower in commodities markets in London and New York, where the price for one tonne in May had slid to a nine-month low of $2058. Prices are falling on expectations that the harvest will be larger than expected due to the late rains. Also affecting the price is the current rate of global production, which, despite falling overall due to changing weather patterns, has exceeded global demand in the past two years.
Ghana’s cocoa is considered a premium product on global markets, selling for a higher per-tonne price than that of Côte d'Ivoire’s larger output. Hopes for the long term are expressed in the state goal to reach 1m tonnes of annual production and to, at minimum, sustain that level of output.