Ghana’s record high cocoa production depressing global market prices
The latest monthly figures from the International Cocoa Organisation (ICCO) have revealed further market instability in the sector, as commodity values continue to fluctuate amid concerns regarding over-supply in Ghana and Cote d’Ivoire
As the industry body recently revealed, core markets of Ivory Coast and Ghana are facing a challenging situation with excess supply a key factor in impacting on prices of the key ingredient for the chocolate market.
Ironically, Ghana’s record high production for the 2020/21 crop season of close to 1.1 million tonnes is contributing to the excess which is exercising downward pressure on global commodity market prices.
Trading conditions have remained complicated in the region, with the Ivorian government having reduced direct payments to farmers in April by 25%, while the ‘farmgate’ price paid to neighbouring Ghana was in fact maintained, as its crops performed consistently, with its mid-crop results showing a 12% increase, with reported assistance measures from the country’s government.
Consequently, reports from Bloomberg recently reported that Ghana had recorded its best harvest for a decade, at 965,493 metric tonnes in early June, with farmers seemingly on course to benefit from the freshly introduced Living Income Differential payments of $400 per tonne of cocoa that the Ivory Coast and Ghanaian governments heralded last autumn as a key solution to raising farmer payments to sustainable levels. COCOBOD itself now claims that production is heading for a long term record high.
Significantly, in May the ICCO had forecast global record cocoa production of 5.024 million tonnes for the 2020/21 season, marking the first time the 5 million mark has been broken – yet demand has reportedly been inconsistent in regions around the world during the past year amid the pandemic.
According to the organisation, record productions are expected in Ivory Coast and and Ecuador as well, following conducive weather conditions in cocoa producing areas. Despite an expected increase in world grindings, a production surplus of 165,000 tonnes is currently anticipated for the crop year under review.
Furthermore, in terms of share of total world production, the ICCO noted that Africa is expected to remain by far the largest cocoa producing region, accounting for 77% of world cocoa output. The shares of the Americas and Asia and Oceania are likely to be 17% and 6% respectively.
COCOBOD is finalizing negotiations to take a US$2 billion loan from a syndicate of international banks, this year’s version of its annual receivables backed loan facility. Instructively in the past few years the size of this facility has rarely exceeded US$1.5 billion and last year it was only US$1.3 billion.