The government’s sharp reduction of cocoa farmgate prices for the remainder of the 2025–2026 crop season has sent shockwaves through Ghana’s cocoa sector, sparking anger among farmers and raising concerns about the sustainability of the forward sales system.
Finance Minister Dr. Cassiel Ato Forson announced that the price of a bag of cocoa has been cut from GH¢3,625 to GH¢2,587, representing a loss of GH¢1,038 or 28.6% per bag.
Similarly, a tonne of cocoa has been reduced from GH¢58,000 to GH¢41,392, marking a significant GH¢16,608 decline, also around 28.6%.
Dr. Forson explained that the adjustment was necessary to reflect realities in the global cocoa market, where international prices have declined.
The new rates are aimed at injecting immediate liquidity into the sector, allowing farmers owed payments to be paid without delay and stabilizing Ghana’s position as a leading cocoa producer.
Forward sales system undermined
Ghana’s cocoa industry primarily uses forward sales, a mechanism designed to mitigate price risks and manage stocks, while also securing syndicated loans.
Under this system, farmers are protected from price reductions after the producer price is fixed, but they are not entitled to price increases if world prices rise after the announcement.
However, the recent 28.6% reduction in the farmgate price has effectively defeated the risk mitigation that forward sales provide, leaving farmers exposed to significant income losses.
Analysts warn that this move may signal a shift toward spot sales, though the government has not announced any plan to buy cocoa under such a system, creating uncertainty for farmers.
Farmers said they have significant stocks of beans at home but no access to buyers after the district officers of the Licensed Buying Companies closed their shops.
The licensed buyers urged the regulator Ghana Cocoa Board (COCOBOD) to secure funding urgently to pay for approximately 300,000 tons of cocoa.
A coalition of Ghanaian cocoa farmers said it was willing to accept lower prices for future deliveries if the government agrees to sign a memorandum of understanding linking farmgate rates to international market prices going forward.
However, the Ghana Cooperative Cocoa Farmers and Marketing Association, which represents about 395,000 members, said the government must first pay what it owes for beans already delivered at the official price.
Producer price review committee sets new rate
The Producer Price Review Committee (PPRC), chaired by Dr. Forson, recommended that farmers receive 90% of the achieved gross Free on Board (FOB) price of $4,200 per tonne, translating into the revised GH¢41,392 per tonne and GH¢2,587 per bag.
“The adjustment reflects the realities of the world cocoa market while ensuring farmers continue to receive payments promptly,” Dr. Forson said.
He emphasized that the measure is part of broader reforms to stabilize the sector, strengthen its financial footing, and protect farmers’ incomes amid volatile international markets.
COCOBOD financial reforms and road liabilities
To further safeguard the sector, Cabinet has transferred cocoa road liabilities of GH¢4.35 billion to the Ministry of Roads and Highways and the Ministry of Finance, following a comprehensive review of COCOBOD road contracts over the past decade.
Between 2014 and 2024, COCOBOD awarded contracts worth GH¢26.5 billion, with GH¢21.5 billion committed between 2018 and 2021.
Under the IMF programme, exposure was to be reduced to GH¢6.9 billion, but previous boards failed to implement rationalisation.
The joint review reduced the exposure to GH¢4.35 billion, strengthening COCOBOD’s balance sheet.
New financing model for 2026/27 crop season
The government also announced a new financing model for the 2026/27 season.
Domestic cocoa bonds will fund purchases, with proceeds repaid within each crop year.
COCOBOD will be allowed to sell beans to local processors, promoting value addition and job creation, with at least 50% of cocoa processed locally.
Additionally, about GH¢5.8 billion of legacy debt owed to the Ministry of Finance and the Bank of Ghana will be converted into equity, further stabilizing the board’s financial position.
Automatic price adjustments and oversight
A new COCOBOD bill will be presented to Parliament to ensure automatic producer price adjustments based on world market prices, exchange rates, and other variables while guaranteeing a minimum price for farmers.
Dr. Forson also directed the Attorney General to commission a forensic audit and criminal investigation into COCOBOD’s operations over the past eight years.
The Ministry of Finance will implement streamlined operations, cost-cutting, and curbing of wasteful expenditure.
Implications for farmers and the cocoa sector
While the 28.6% reduction in farmgate prices translates into a GH¢1,038 loss per bag and GH¢16,608 per tonne, the government maintains that immediate payments, debt restructuring, and the new financing model will inject liquidity, restore confidence, and safeguard the long-term sustainability of the cocoa industry.
These measures aim to stabilize farmer incomes, support domestic processing initiatives, and ensure Ghana retains its global leadership in cocoa production, despite volatile international market conditions.
