Amid the controversial debate of the government’s decision to cut cocoa producer price by about 30%, an Associate Professor of Development Economics at the Institute of Statistics, Social and Economic Research at the University of Ghana, Fred Dzanku, maintains that all is not that gloomy as it appears.
Prof. Fred Dzanku is urging a shift from the skewed narrative on the cocoa price subject to a broader conversation that takes into consideration the level of inflation.
Amid the debate, the economist acknowledges the pain felt by farmers as cocoa farmers, on paper, have recorded about 30% price cut. However, he argues that the bigger picture tells a more nuanced story.
For him, the real value of what farmers earn today remains comparatively strong, largely because inflation has fallen sharply.
The FoB Price Versus World Market Price Debate
Prof. Dzanku, in his analysis, explains how much of cocoa’s total value actually gets to the farmer.
He recalls that historically, farmers have received between 70–77% of the Gross Free-On-Board (FOB) value.
On the contrary, when juxtaposed against the world market price, the farmers’ share has ranged more widely, between 48% and 77%, depending on the pricing regime in place.
“How much of cocoa’s value actually reaches farmers? As shown in the first chart, farmers received about 70–77% of the gross FOB value, but only 48–77% of the world market price, depending on the regime. That gap matters when asking who ultimately bears the cost when global prices fall,” his analysis.
This analysis suggests that, given that farmers are not getting the full world price in the windfall period, there is a need for careful analysis of who is really bearing the greater cost amid the price dip.
The conversation, he says, cannot focus solely on the headline reduction. It must also consider how value is shared across the supply chain.
Real Value Matters More Than Nominal Price
Although the debate has centered on the nominal price cut, he believes that it is missing a very important argument of purchasing power
He agrees that the nominal producer price has been reduced; however, inflation has dropped substantially compared to recent years. This, he says, means that the real value of the current cocoa price remains stronger than much of what farmers experienced over the past decade.
This means that with inflation currently in a single-digit range, the real purchasing power of farmers with the current price is still strong. For Prof. Dzanku, although the price cut is painful, their welfare, measured against the level of inflation, remains strong and intact.
The economist suggests that if prices of goods and services are stabilising or rising more slowly, each cedi earned stretches further. That cushions the impact of a nominal price cut.
“With inflation down sharply, the real (inflation-adjusted) value of today’s producer price remains stronger than for much of the past decade. Nominal cuts matter but welfare ultimately depends on what each cocoa cedi can actually buy,” he noted in his analysis.
Farmer Agitations Nationwide
Amid the debate, a section of farmers are registering their displeasure over the price cut across the country. These farmers have staged a number of protest at various places, with a group from the Western Region picketing at the COCOBOD headquarters in Accra.
These farmers are bemoaning the impact of the price on their livelihoods, their debts, and their ability to invest in their farms. They are calling for the restoration of the old price prior to the haircut.
However, it should be well noted that the protest has been dismissed as politically motivated.
The Bottomline
While the farmers raise concern over the impact of the price cut on school fees, farm inputs, food, and healthcare, the economist argues that with the moderation of inflation those costs do not escalate as rapidly, preserving real income.
Prof. Fred Dzanku is situating the conversation in the broader macroeconomic context.
He does not dismiss farmers’ frustrations. Instead, he calls for a more balanced assessment; one that recognises both the emotional weight of a price cut and the economic reality that purchasing power remains relatively resilient.
