Home Business Cocoa Export Earnings Plummet by Nearly 50%

Cocoa Export Earnings Plummet by Nearly 50%

Ironically, the significant rise in cocoa prices on the international market is attributed to a notable production decline in major producing countries like Ghana

by Vesta Daily
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Cocoa Export Earnings Plummet by Nearly 50%

According to the Bank of Ghana, Ghana’s earnings from cocoa exports have plummeted, falling by 49% to US$599.3 million in the first four months of this year as compared to the same time in the previous year.

The world price of cocoa increased by an astounding nearly 200%, from roughly $4,235.60 in December 2023 to between $10,116.9 and $12,261 per tonne in April 2024, notwithstanding this reduction.

Ironically, a large reduction in production in major producing countries such as Ghana is credited with driving up cocoa prices on the global market. From a record high of over a million tonnes in the 2020–2021 crop season to between 492,000 and 580,000 tonnes in the 2023–2024 season, Ghana’s cocoa production fell precipitously.

There are several reasons why Ghana’s cocoa output is falling. The “unbridled and unmitigated age-old challenge of cocoa smuggling to neighbouring Cote d’Ivoire and Togo” and the pervasive threat of illegal small-scale mining (Galamsey) were noted as major issues in a statement released by the Ghana Cocoa Board on January 12, 2024. The statement said that these actions had severely damaged Ghana’s cocoa industry and decreased earnings from the cocoa trade.

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The problem has been made worse by climate change and its associated variables, such as erratic rainfall patterns and rising temperatures. Trees have been left parched by droughts, and overabundance of rain has given rise to fungal diseases such as Swollen Shoot, a destructive virus that spreads quickly through plantations and eventually kills cocoa trees, resulting in large production declines.

Another contributing cause is the high cost of inputs, especially fertilizers, which were previously given to farmers at no cost. Asutware-based cocoa grower Kwame remembers earlier days when a bag of fertilizer used to cost about 200 cedis. Today, the same bag costs 280 cedis, a 40% increase, as a result of worldwide shortages and a declining cedi. Farmers are concerned about the next harvests as a result of the increase in input costs, which reduces revenues.

One of the causes of the cedi’s 14.6% depreciation on the interbank market and almost 19% depreciation on the retail market since the year’s beginning is the notable decline in cocoa production and export revenues.

At the Central Bank Governor’s post-Monetary Policy Committee press conference on Monday, May 27, Dr. Ernest Addison said, “The exchange rate pressures witnessed in recent weeks reflect a weakening of the current account surplus, due to higher import demand and lower export revenue, especially a sharp fall in cocoa export earnings.”

This sentiment was confirmed by Bloomberg in April when they linked the fall in the dollar supply to a decline in cocoa earnings. The company said that poor weather, disease, and shortages of fertilizer caused cocoa exports to plummet by about a third to $508 million in the first two months of the year.

Ghana’s foreign exchange inflows are also impacted by the decline in cocoa production. Depending on final production volumes, the annual syndicated loan, which used to bring in close to $1.5 billion, may come in as little as the $800 million secured last year. Last year, the administration had a difficult time getting the $800 million loan.

A Reuters story from May 26, 2024 states that COCOBOD withdrew $600 million and cancelled the remaining amount since this season’s cocoa production is expected to be about 40% lower than anticipated and cannot support the entire loan.

At the same time, non-traditional exports had a 6% decline to US$981.8 million from other exports.

Vesta Daily
Author: Vesta Daily

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