Cocoa: Export drops by $700m in first half of 2024
GHANA’S cocoa export revenue has taken a severe blow, dropping by nearly $700 million in the first half of 2024.
The cocoa industry, a key pillar of the country’s economy, is grappling with the devastating effects of illegal mining (galamsey), smuggling, and crop diseases, all of which have significantly reduced production.
According to the Bank of Ghana’s Summary of Macroeconomic and Financial Data for July 2024, cocoa export earnings fell sharply from $1.45 billion in the first half of 2023 to just $760 million in the same period this year, representing a 47.7% decline.
Post-pandemic, Ghana’s cocoa export revenues have been declining, with half-year inflows revealing a dramatic 134% drop, resulting in losses exceeding $1 billion since 2021.
The Ghana Cocoa Board (COCOBOD) had forecasted a cocoa harvest of 650,000 to 700,000 tons for the 2023-2024 season. However, industry insiders warn that factors such as adverse weather, crop diseases, fertilizer shortages, and galamsey in cocoa-growing areas could push yields below 500,000 tons.
Additionally, increased smuggling of beans to neighbouring countries, where prices are higher, could cost Ghana up to 200,000 tons, further threatening the nation’s ability to secure much-needed financing through its cocoa syndication programme.
COCOBOD’s creditworthiness in the international syndicated loan market has also been affected by its inability to meet supply obligations and the country’s ongoing debt restructuring process.
To manage this situation, COCOBOD has shifted to domestic self-financing. The near-collapse of Ghana’s forward cocoa sales last season sent a warning that a significant risk premium would now be attached to Ghana’s cocoa beans, not only for this season but for future ones as well.
Ghana’s failure to meet contractual commitments to cocoa buyers has cost trading houses over $1.4 billion on cocoa derivatives, as they were forced to liquidate short positions during a market rally, which saw prices soar to $10,000 per ton.
The uncertainty surrounding Ghana’s cocoa sector is driven by multiple factors: adverse weather, crop diseases, smuggling, illegal mining, and the country’s default on cocoa contracts last season.
These issues have heightened risk perception among investors and international buyers, making it difficult for COCOBOD to secure the $1.5 billion in external funding initially projected for this season. Rising interest rates, driven by perceived risk, may now price Ghana out of the market.
Cocoa, historically Ghana’s primary source of foreign exchange, has played a critical role in stabilizing the cedi, especially against the US dollar. However, the performance of the sector has been dismal in 2024.
Total government revenue and grants dropped significantly in the second quarter, largely due to a fall in key tax revenues and a sharp reduction in cocoa inflows. Cocoa export earnings plunged nearly 48% in the first half of the year, representing a shortfall of more than $690 million. This has contributed to the cedi losing over 20% of its value against the US dollar since the start of 2024.
Ghana’s reliance on cocoa exports is now at a crossroads, as both domestic production and international market confidence are in decline. While COCOBOD’s shift to domestic financing may offer temporary relief, unless the underlying production and export challenges are addressed, the future of Ghana’s cocoa sector — and the broader economic stability of the country — remains at risk.
Credit: www.myjoyonline.com
