Deputy Minister for Food and Agriculture in charge of Perennial Crops and Cocoa Affairs, Kennedy Osei Nyarko, has strongly debunked the position of the opposition National Democratic Congress (NDC) that the government is cheating farmers for maintaining the cocoa price, saying that “the decision to maintain a price of GH₵7,600 per metric tonnes producer price despite a drop in the world market price, is the most magnanimous thing to do under the circumstances”.
He explained the decision compelled government to borrow about GH₵2billion to make up for the losses to cushion farmers so far since NPP assumed office.
In the 2018/2019 season, government is likely to borrow about one billion cedis to make up for the losses to be incurred for maintaining the price.
He added that NPP has a better cocoa production and pricing regime compared to the record of the NDC.
The World Market Price of cocoa is $2,100 which translates into GH₵10,560 at the exchange rate of GH₵4.8.
72% of FOD paid to farmers
And according to the Deputy Minister paying the farmer the same GH₵7,600 per metric tonnes or GH₵475 per bag translates into 72 percent of the Free On Board (FOB) price. The world’s top cocoa producer, La Cote d’Ivoire, increased guaranteed price it pays farmers by seven percent – i.e. $1.34per kilogramme –while Ghana kept its price flat at $1.53 per kilogramme, which translates to GH₵475 per a bag of 64 kilogrammes.
This means that cocoa farmers in Ghana will earn GH₵1,000 more than their counterparts in Cote d'Ivoire for the producer price of the commodity in the 2018/2019 crop season which opened on October 1, 2018.
$2,950 World market price in 2016/2017 season
Throwing more light on the matter, the Deputy Minister said in the 2016/2017, when NDC was in government, the World market price was an average of $2,950 and using the then prevailing exchange rate of GH₵3.95 to the dollar would translate to GH₵11,652.50. Given that, he said the exchange rate of GH₵3.95, the total FOB value would be GH₵9,904. 625 per metric tonnes.
He further explained that the industry cost is then deducted before arriving at the Net FOB of 70 percentwhich should be the least producer price for farmers, but, he said the Net FOB was for that season was GH₵ 9,812.71, which means the percentage paid to the farmer was 77.45 percent.
“Using the universal formula means that the farmer was being paid 65.22% which was below the minimum 70 percent and if we are to admit their inclusion of premium rate in the calculation at their ridiculous $350, it would mean NDC were paying the farmer 57.12 percent of FOB price.
“Meanwhile, it is worthy to note by all Ghanaians that Ghana attracts an average of $120 to $140 on cocoa beans, whiles the light crop to substandard beans are sold at discount of 20-30 percent and it is, therefore, misleading for the minority to deceive us by adding premium rate factor to the pricing of the producer price, for all our beans are not attracting the premium”, he explained.
2017/2018 Crop Season
He further explained that the cocoa price in the 2017/2018 season on the world market sunk as low as $2,080 and at the exchange rate of GH₵4.4, the tone sold for GH₵9,152 and yet the NPP in keeping faith with the farmers maintained the 2016/2017 price of GH₵475.
83% FOB price paid to farmers 2017/2018
This, he stated, translated into the government paying 83 percent of FOB to the farmer, emphasizing that “this confirms the government consistency of ensuring that the universal formula of paying a minimum of 70 percent is preserved.
Mr Nyarko indicated that the introduction of productivity improvement schemes such as mass spraying, fertilization, subsidy and hand pollination aimed at improving the current 450 kilogram per hectare to minimum of 1500kg per hectare contributed to the high cocoa produce yield after NPP took over.
Ghana’s cocoa is mostly sold forward. The achieved FOB for the 2018/19 crop year is the average price realized on the physical market for the 2018/19 crop year. The price of cocoa on the terminal market since June 2016 has generally been bearish.
2018/19 terminal cocoa market price
The terminal cocoa market price realized by COCOBOD averaged $2,200 per tonne for the 2018/19 crop year with a low of $1,917 per tonnes and a high of 2,659 per tonne.
20-35% discounts
COCOBOD quoted FOB price of cocoa is the weighted average price received on main crop category, light crop and other lower bean size cocoa which are sold at discounts ranging from 20-35% to local processing companies.
This further depresses the average achieved FOB for the entire crop (Main and light crop beans) which form the basis for the determination of producer price for cocoa.
COCOBOD’s quoted average FOB price of $2,200 per tonne is lower than ICCO’s average price of $2,265 per tonnes for the 2018/19 crop year due several factors.
Ghana’s weighted average price is depressed by the influence of the light crop and other smaller categories beans which are sold at discounts.
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