Ghana’s second farmgate price increase this season still falls short of the price offered by its chief competitor, Ivory Coast. This persistent price gap maintains the financial incentive for cocoa beans to be smuggled across the border.
Ghana’s Finance Minister, Cassiel Ato Forson, announced the farmgate price is now 3,625 cedis ($288.84) per 64-kilogram bag, effective Friday, up from 3,228.75 cedis. This move was a direct response to Ivory Coast’s action a day earlier to raise its state-set price by 27% to a significantly higher 2,800 CFA francs ($5) per kilogram.
Ghana’s new rate, which translates to $4.5 per kilogram, leaves its farmers earning less per kilogram than their Ivorian counterparts, sustaining the “price war” between the two nations.
The objective of the competitive price hikes is to discourage farmers from smuggling beans to the country offering better remuneration. However, the price differential means the risk remains high, particularly as the Ivorian regulator reported that between 100,000 and 150,000 tons of beans were smuggled out of the country in the last season alone.
Price War and Political Motivation
Ivory Coast’s significant price increase comes with a political dimension, as the country is preparing for a presidential election later this month. Higher producer prices often serve as a measure to boost farmer satisfaction ahead of key political events. The move forces Ghana, which aims to be “competitive,” to react with its own price adjustments.
The government in Accra was partially enabled to fund the price increase by the recent weakening of the cedi. The local currency has depreciated by over 16% against the dollar since the cocoa season began. This slump increases the cedi value of foreign exchange earnings from cocoa exports, providing more local currency for the Ghana Cocoa Board (Cocobod) to use for farmer payments. However, the cedi’s earlier weakness had also initially eroded the value of farmers’ pay, creating the initial incentive for increased smuggling.
Ghana’s title as the world’s second-largest cocoa producer is under serious threat, with cocoa volumes dropping consistently over the past five years. Analysts now fear Ecuador could soon overtake the West African nation.
This decline is driven by a convergence of severe challenges: low yields, inadequate investment in the sector, adverse climatic conditions, and the takeover of cocoa farmlands by illegal miners (galamsey).
The situation is now further exacerbated by the price war with Ivory Coast. With its neighbour offering a higher farmgate price to farmers, analysts warn that Ghana’s sector faces bigger troubles, as already strained production volumes are now highly vulnerable to large-scale smuggling across the border.
