Ghana delays cocoa delivery, impacting global chocolate prices

Ghana, the world’s second-largest cocoa producer, is set to delay the delivery of up to 350,000 tons of cocoa beans to the next season due to poor crops, according to five sources who spoke to Reuters. This decision further exacerbates the challenges facing the global chocolate industry.

Chocolate makers globally are already raising prices after cocoa prices more than doubled this year, following a third consecutive year of poor harvests in Ghana and Cote d’Ivoire, which together account for 60 percent of global production.

Previously, the market estimated Ghana would roll forward about 250,000 metric tons of cocoa, about half of its current crop. However, Cocobod, Ghana’s cocoa regulator, stated the country plans to roll over ‘some volumes, but not in those (350,000 ton) quantities.’

Ghana’s cocoa crop has been severely affected by adverse weather, bean disease, and illegal gold mining, which often displaces cocoa farms. Additionally, Ghanaian farmers are increasingly smuggling beans to neighbouring countries to sell them at higher prices than the state purchasing price, further reducing the available crop for delivery in Ghana.

Sources revealed Ghana pre-sold around 785,000 tons of beans for the 2023/24 (October-September) season but will likely deliver only about 435,000 tons. Ghana typically sells 80 percent of its crop one year forward, usually totalling 750,000-850,000 tons. However, last season’s crop fell to around 670,000 tons and is not expected to exceed 500,000 tons this season. Traders and industry experts fear that the crop may not rebound significantly next season either.

The International Cocoa Organisation predicts global cocoa production will decrease by 10.9 percent to 4.45 million tons this season. This shortfall means processors and chocolate companies will need to rely on cocoa stocks to meet their requirements.

The current price rally is disrupting the established mechanism for cocoa trade. Ghana uses the average of its forward sales to set the minimum price at which traders can purchase cocoa from farmers the following season. With about 350,000 tons of forward-sold beans missing from this season’s crop, Ghana is facing difficulties with forward sales for the next season. Two sources indicated the country has sold forward just 100,000 tons.

These 100,000 tons, along with the 350,000 tons being rolled into the next season, were sold at less than half of the current world cocoa prices, making it challenging for Cocobod to increase farmer prices next season based on these sales. While Cocobod stated that forward sales were progressing as usual, it declined to disclose volumes or prices.

Failure to raise prices will likely lead farmers to increase bean smuggling, switch to other crops, or sell more farms to gold miners, according to the sources.

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