Ghana will probably start drawing from its stabilization fund to cover cocoa farmers’ pay during the season that starts in October as the second-biggest grower props up local prices in the face of a global slump.
While Ivory Coast, the largest producer, has already slashed the price it pays farmers for the smaller of two annual crops by 36 percent, Ghana’s Cocoa Board so far kept it unchanged and is ruling out any cuts for the upcoming main crop, despite its own mounting debt. The country is hoping that demand in Asia and the Middle East will increase to boost international prices, Deputy Chief Executive Officer Yaw Adu-Ampomah said in an interview.
Cocoa futures in New York have declined about 33 percent in the past year as analysts predict a large global surplus for the season ending in September.
“Right now the stabilization fund is being looked at in case it falls further,” Adu-Ampomah said. The government contributes to the fund during boom years and the money is available to support farmers when needed, he said, while declining to comment on the fund’s current balance.
Ivory Coast and Ghana are both expecting bumper harvests this season, and average cocoa prices aren’t seen rising more than about 10 percent over the next 12 months, according to the median of 18 analyst estimates compiled by Bloomberg.
Ghana may not pay bonuses to farmers this season because of lower prices, CEO Joseph Boahen Aidoo told reporters last week.
“Considering the current level of prices, we believe we are paying $400 more per ton to our farmers,” he said.
The two countries aren’t discussing production cuts as part of their efforts to cooperate on cocoa strategy and boost international prices, Adu-Ampomah said. The cocoa board and its counterpart in Ivory Coast are exploring partnerships in emerging markets such as India, China and Dubai to boost processing of the beans, as well as looking at ways to increase local consumption, he said.
The cocoa board is in talks with the Bank of Ghana about refinancing its debt, he said, without providing further details. Borrowing increased to 10 billion cedis ($2.3 billion) after the nation missed its production target in the previous season and as the slump in prices weighs on revenue from the current crop.
The board is also taking steps to reduce wasteful spending, Adu-Ampomah said. It has put contracts to build roads in cocoa-growing regions on hold while previous deals are audited and will better prioritize infrastructure projects and reduce social-responsibility spending, he said.
The board bought over 800,000 metric tons of beans in the 2016-17 main crop season and aims to purchase 80,000 to 100,000 tons in the light crop that began on June 9 and ends in September, he said.