With the Akufo-Addo/Bawumia administration struggling to meet revenue targets, Government is considering cutting the price it pays to cocoa farmers because, according to Finance Minister Ken Ofori-Atta, a slump that started more than a year ago shows little sign of abating.
A price cut would signal a policy shift in the world’s second-biggest grower of the beans, which has ruled out changing farmer payments since setting the minimum price at 7,600 cedis ($1,700) per metric ton in October 2016.
Over the same period, futures contracts in London have slumped by more than a third to near the lowest in six years on forecasts of a second consecutive bumper crop in West Africa.
In neighboring Ivory Coast, the biggest producer, the cocoa regulator lowered minimum pay for its main harvest that started in October by 36 percent to the equivalent of $1,247 per ton. “Cocoa is a problem,” Ofori-Atta said Wednesday on the sidelines of a briefing by President Nana Akufo-Addo in the capital, Accra.
Ghana needs “to have a discussion at cabinet level and put out a formula that is similar to that of Ivory Coast.” Record crop Cocoa for March delivery rose 2.2 percent to 1,443 pounds ($1,985) per ton on Wednesday in London, extending gains for the year to 2.45 percent.
Prices are unlikely to improve significantly as traders remain optimistic over the crop from West Africa, INTL FCStone said in a report. Ivory Coast produced a record crop of more than 2 million tons in the season through September, while Ghana’s harvest of 970,000 tons was the highest in six years. Ghana would prefer to pay farmers the equivalent of 70 percent of freight-on-board prices, Ofori-Atta said.
The industry regulator said it was subsidizing producer pay with about 984 million cedis for the annual season that started the previous month, in addition to exhausting the 310 million cedis of a stabilization fund. Cocoa beans are processed into powder, used in ice cream and cookies, as well as cocoa butter, which accounts for about 20 percent of a chocolate bar.