Ghana, the world’s second-largest cocoa producer, is looking to delay the delivery of up to 350,000 tons of cocoa beans to the next season due to poor crop yields, according to five sources cited by Reuters. This development exacerbates the already troubling outlook for the global chocolate industry.
Chocolate makers worldwide have been raising prices for consumers as cocoa prices have more than doubled this year. This spike follows a third consecutive year of poor harvests in Ghana and Ivory Coast, which together account for 60% of global cocoa production.
Initially, the market estimated Ghana would defer about 250,000 metric tons of cocoa, roughly half its current crop. However, Ghana’s cocoa regulator, Cocobod, indicated the country plans to roll over “some volumes, but not in those (350,000 ton) quantities.”
Ghana’s cocoa crop has suffered from adverse weather conditions, bean disease, and the displacement of cocoa farms due to illegal gold mining. Additionally, Ghanaian farmers are increasingly smuggling beans to neighboring countries to sell at higher prices than those offered by the state purchasing program, further diminishing the available crop for domestic delivery.
Ghana typically sells approximately 80% of its crop one year in advance, usually amounting to 750,000-850,000 tons. However, last season’s crop fell to around 670,000 tons, and this season’s output is not expected to exceed 500,000 tons. Industry experts fear that the crop may not significantly rebound next season either.
The International Cocoa Organisation predicts global cocoa production will drop by 10.9% to 4.45 million tons this season, forcing processors and chocolate companies to rely on existing cocoa stocks to meet their needs.
Challenges with Forward Sales
The current price surge is disrupting the traditional cocoa trade mechanism. Ghanaian authorities typically use the average price of forward sales to set the minimum price for traders purchasing cocoa from farmers the following season. With approximately 350,000 tons of forward-sold beans missing from this season’s crop, Ghana is struggling with forward sales for the next season. Sources report that the country has sold forward only 100,000 tons so far.
These 100,000 tons, like the 350,000 tons being deferred to next season, were sold at less than half the current world cocoa prices. This situation means Cocobod will find it difficult to increase farmer prices next season based on these sales. While Cocobod claims that forward sales are progressing as usual, it declined to disclose specific volumes or prices.
Failure to raise prices may lead farmers to increase bean smuggling, switch to growing other crops, or sell more of their farms to gold miners, according to sources.
