GHANA'S NEW COCOA PRICE: SUSTAINING INCOMES, LIVELIHOODS AND THE ENVIRONMENT

Date: 01st October 2024

Ghana recently announced a landmark increase in the price of cocoa for the 2024/2025 Season, raising the price to GH¢48,000 per tonne - a staggering 129% increase from the previous season. At Gh¢3,000 per 64kg bag, the cocoa sector regulator, Ghana Cocoa Board, says the price aligns with global cocoa price trends.

Analysts say this move, by the Ghana Cocoa Board (COCOBOD) and the Ministry of Food and Agriculture, holds the potential to reshape the cocoa industry in multiple ways, particularly in improving farmer livelihoods and addressing the chronic issues of cocoa smuggling across borders and the increased illegal mining activities.

Farmers at the Heart of Change
Cocoa farming has long been the backbone of Ghana's agricultural sector, with the livelihoods of over 800,000 smallholder farmers tied to its success. Even though some farming inputs are supplied at subsidised rates by COCOBOD, with Ghana’s economic downturn, farmers have complained about increasing costs of farming inputs.

Adding to the challenges farmers face is the drastic change in weather patterns and the upsurge in the rate of infection of the Cocoa Swollen Shoot Virus Disease, which has eroded farmers’ efforts and incomes, destroying about 500,000 hectares of cocoa.

At the back of this, the higher prices announced this crop year are expected to have a transformative impact on rural cocoa-growing communities, where a majority of the country’s small-holder farmers (the backbone of the sector) reside. 

Empowering Farmers
Improved Livelihoods: The price hike is a major step towards improving the income of cocoa farmers, who have long been denied their due earnings due to the lack of commitment of big industry players to pay the Living Income Differential set up by Ghana and the Ivory Coast to augment cocoa price. With this increase, farmers can better support their families, invest in their education, healthcare, and pension, and reinvest in their farms to improve upon yields.

Incentivising Production: By offering better and remunerative prices, the government is encouraging farmers to stay in the cocoa sector and invest in sustainable agricultural practices. This move aims to increase productivity and ensure that cocoa farming remains attractive, especially for the younger generation. This will also encourage expansion of the production side through farmers’ investment in productivity enhancement activities that would improve the sustainability of a sector that is reeling under the sweeping impact of climate change.

Alleviating the Effects of Inflation: The increased cocoa price is expected to help counter the rising cost of living in Ghana, as the global economic meltdown has resulted in high inflation, affecting the purchasing power of cocoa farmers. This financial boost is essential for cushioning the economic pressures on farmers.

Battling Smuggling
Discouraging Cross-border Smuggling: Cocoa smuggling from Ghana to neighbouring countries like Côte d'Ivoire has been a persistent issue due to the price differentials between the two countries. Already, a third of Ghana’s production for the 2023/2024 season, estimated at 160,000 tonnes, was lost to smuggling. It is hoped that the new price will help to close this gap, making it less lucrative for middlemen to sell their cocoa across our borders. This will help to retain more cocoa within Ghana.

Strengthened Border Enforcement: Alongside the price increase, the Ghana COCOBOD has committed to enhancing border patrols to reduce the movement of cocoa to neighbouring countries. This approach, coupled with better prices, is expected to curtail the incentive for smuggling.

Combating Illegal Mining (Galamsey)
Deterring Land Conversion: One of the factors contributing to the decline of cocoa production has been the encroachment of illegal mining (locally known as galamsey) on cocoa farms. The price increase offers farmers a more profitable reason to keep their land for cocoa production rather than selling for mining activities, which has caused significant environmental degradation.

Government Crackdown on Mining: The government is not only raising cocoa prices but also intensifying efforts to combat illegal mining operations. By providing economic incentives to stay in farming, it is believed that farmers will not have reasons to sell or lease their land to miners. This will preserve agricultural land and promote environmental sustainability.

Broader Economic and Social Impacts
Supply Chain Stability: The new pricing structure is expected to enhance stability within Ghana's cocoa supply chain, reducing supply shortages caused by smuggling and land loss to mining. This, in turn, should solidify Ghana’s position in the global cocoa market.

Sustainability Goals: Higher prices may also enable farmers to adopt more sustainable farming practices, such as agroforestry or organic farming, which could improve cocoa yields and contribute to long-term environmental conservation efforts. COCOBOD has already invested in plantain agroforestry to help diversify farmer incomes, and the improved income security will help farmers sustain this practice.

In conclusion, Ghana's new cocoa price is a strategic move to empower farmers, discourage smuggling, and address the pervasive threat of illegal mining. These efforts could lead to a more sustainable cocoa industry while improving the livelihoods of farmers and protecting vital farmland and the ecosystem from environmental harm.

By Rhoda Onyinah
Public Affairs Department