Cocoa producer price: Cocoa, Coffee, Sheanuts farmers hail govt

The National Chief Farmers of Ghana Cocoa, Coffee and Sheanuts Farmers Association (COCOSHE) has expressed gratitude to the President and the Minister for Food and Agriculture for the significant increase in cocoa producer price for the 2023/2024 season.

President Akufo-Addo announced 63.5% increase in the new producer price for the 2023/2024 cocoa season.
The price increased from GH₵12,800 to GH₵20,943 per tonne.

GH₵1,308 per 64kg bag

This translates into GH₵1,308 per 64-kilogramme bag sold to Licensed Buying companies from the previous GH₵800 per bag.

70.03% of FoB

The new price is 70.03% of the Gross Free on Board (FoB) price, and is equivalent to $1,821 per tonne of the $2,600 weighted average price COCOBOD secured.

COCOSHE expresses gratitude

Considering this significant, the National Chief Farmers of COCOSHE  led by its President, Alhaji Alhassan Bukari, called on Food and Agriculture Minister Dr. Bryan Acheampong to express gratitude for the honour done to cocoa farmers to compensate for their efforts.

The farmers commended the role Dr. Acheampong played culminating in a great leap in the price increase for the 2023/2024 cocoa season. Alhaji Bukari indicated that the increase in commodity prices is a motivation to increase their production.

The leadership of COCOSHE in a group photo with Dr Bryan Acheampong after a meeting at Ministry of Food and Agriculture.

 

The farmers however called on the Minister to intensify the fight against Galamsey and to reclaim all productive land for the sector.

Minister grateful to farmers

On his part, Dr. Acheampong expressed gratitude to the farmers for their key role in the national economy.

The Minister said, in appreciation of this immense contribution, the president and the ministry are mindful of the very group of people whose toils and sweats have, for several decades, sustained this sector because of the hardworking cocoa farmers.

He said Cocoa is a very important aspect of the country’s economy and this transcends beyond regions, to supporting developmental projects ranging from the provision of electricity to improvements in road infrastructure across the country.

Cocoa price from 2016 to 2022

Cocoa prices have increased from GH₵7,600 per tonne in 2016, to GH₵12,800 per tonne in 2022, a significant increase of 68%.

This has had an adverse impact on COCOBOD’s financial performance

The new producer price is the highest price to be paid to cocoa farmers across West Africa in some 50 years.

When the President broke the news at a function at Tepa in the Ahafo-Ano Municipality, elated farmers rushed in front of the podium to express their excitement about the quantum increase of the producer price.

It took security details present to restrict some of them from climbing the podium in their joyous mood.

The President had to take a break in his speech for about five minutes to allow the farmers jubilate.

2 Crop size categories of beans

Ghana produces both the Main Crop size category of beans (big sized cocoa beans), and the Light Crop size category of beans (small sized cocoa beans).

Light crop beans discounted

The light crop beans are sold at discounts ranging from 20% to 40% on the international market.

Weighted average price from international market

The FoB price received by COCOBOD from the international market is therefore the weighted average price of both the main crop and light crop beans.

This situation depresses the average weighted FoB price received by COCOBOD for the two crop categories (main and light crop beans) which forms the basis for the determination of the producer price for cocoa.

COCOBOD’s price excludes insurance and freight

Though the international price of cocoa includes Cost, Insurance and Freight (CIF) value, COCOBOD receives only the FoB price which is cost of the cocoa beans only.

This is because, insurance and freight are received by the insurance companies and shipping lines respectively.

Forward sales

In addition, it is important to note that Ghana’s cocoa beans is mostly sold forward.

This means that the 2023/24 crop was sold between October 2022 and June 2023 at international prices ranging between $2,060 per tonne and $ 2,800 per tonne.

The international price of cocoa then began to increase in April 2023, when a greater percentage of the 2023/24 crop had been sold already.

Guaranteed producer price to cocoa farmers

The forward sale strategy enables COCOBOD to give farmers a guaranteed producer price and raise the syndicated loan offshore to pay farmers promptly for their produce.

Change in Producer Price determination mechanism

The Producer Price determination mechanism has changed from Net FoB to Gross FoB.

The difference is that with the use of net FoB, the amount farmers are paid is arrived at after all industry costs had been deducted.

With this method, farmers receive less of the total proceeds from the sale.

However, with the change in the mechanism to gross FoB, the amount that farmers are paid is determined first before all other industry costs.

This method ensures that farmers get more from the sale of the beans.

Industry cost capped at a maximum of 40% of gross FoB

There is a reduction in industry cost, which is capped at a maximum of 40% of gross FoB and not net FoB.

Increase in production

The implementation of the productivity enhancement programmes has led to an increase in productivity of cocoa farms from an average of 450 kilos per hectare in 2015/16 season to an average of 650 kilos per hectare in the 2022/23 season.

This has led to an increase in the income of cocoa farmers.

It is also worth noting that government through COCOBOD has invested heavily in productivity enhancement programmes such as the mass spraying, pruning, hand pollination, rehabilitation of diseased farms and the subsidized fertilizer programmes.