Cocoa realities and my cup of Milo
Beyond the cocoa-growing communities in the country, the recent announcement in Tepa, Ashanti, by President Nana Addo Dankwa Akufo-Addo of farm gate prices of cocoa beans has understandably caused quite some stir on the political landscape.
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For the new cocoa season, the president announced a 63.6 per cent increase in the price of a ton of cocoa from GH¢12,800.00 per ton to GH¢20,943.00 per ton, which translates to a jump from GH¢800.00 per bag to GH¢1,308 per bag.
Apparently, the calculations were based on the achieved Free-On-Board (FoB) Price of $2,600 per tonne from the forward sales of cocoa, with an exchange rate of GH¢11.50 to a dollar.
The price increase of GH¢508 per bag is the highest in Ghana’s history and the highest among West African subregional cocoa-producing countries in the last 50 years.
Everyone appreciates a pay rise, and for the farmers, as indeed for anyone else, 63.6 per cent is an awful lot. The extra income means an improvement in living standards and an ability to invest and meet other needs.
A higher producer price motivates existing cocoa farmers to continue cocoa cultivation and encourage others to enter the industry, which can contribute to the sustainability of the cocoa sector.
The rise is poised to create employment prospects for young individuals in agriculture, engaging them as labourers in tasks like planting, harvesting and cocoa farm maintenance.
Other benefits include economic growth in the cocoa-producing areas and potential increment in the national output and a positive international image for Ghana on the international markets.
Political fallout
It is no surprise that following the announcement, political players from both sides have been shouting themselves hoarse one way or the other in the media.
After all, there is a crucial election coming up. Plus, according to the GCB Bank’s 2022 Cocoa Sector Report, cocoa employs approximately 800,000 farm families spread over six of the 16 regions of Ghana. They also happen to include New Patriotic Party (NPP) strongholds, a fact not lost on either side.
The National Democratic Congress (NDC), understandably, is unimpressed by the scale of the increase and has been busy pouring cold water on it.
The Minority group in Parliament says the government should have increased the price of a bag of cocoa by no less than GH¢2,500.
According to the Minority Leader, Ato Forson, the NDC would have increased the price per bag to at least GH¢2,800. One cannot help but be amused.
Forward sales achieved FOB
According to Fiifi Boafo, Head of Public Affairs at COCOBOD, Ghana engages in forward sales of significant volumes of its cocoa to secure the syndicated loan to pay farmers and has always done so under both NDC and NPP.
As a result, the determination of the producer price takes into account the achieved Free-On-Board (FoB) price over several months of sales.
Since prices in the forward sales market differ significantly from spot sale prices, the most recent archived FoB of $2,600 per tonne is what formed the basis for calculating the new producer prices.
It is therefore incorrect, he says, to calculate what one thinks should have been the Producer Price using the current spot price on the international market.
Mr Boafo says when the NDC was leaving power, the world market price stood at $2,950. Subsequently, the price experienced a sharp decline, averaging around $2,050 in 2017 and then only moderately rising to approximately $2,350 two years later. However, during the period, this NPP government chose to maintain the producer price and resisted international pressure to reduce it. All other cocoa-producing countries reduced their farmgate prices, except for Ghana.
The government, therefore, spent a fortune to absorb the losses instead of passing them on to worsen the plight of farmers.
To this effect, he disagrees vehemently with the opposition NDC’s claim that the government has short-changed cocoa farmers.
Reality
The reality of arguments over FoB, spot price, world prices and other similar, rather technical issues in the industry is that they make good television and radio studio arguments, and perhaps, make lots of sense to ‘book-long’ people, such as analysts and economists, among others.
But the ordinary cocoa farmer primarily cares about what he or she was paid last season and what he or she stands to be paid this coming season. It is that simple, really.
Of course, it would be simplistic to presume that the political harvest for the government on the price, on its own and without more, is bountiful. But it would be equally very simplistic to dismiss its political ramifications. I will certainly be drinking a few cups of hot Milo to celebrate this price increase.
The writer, Rodney Nkrumah-Boateng, is Head, Communications & Public Affairs Unit, Ministry of Energy.
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