Chief Executive of the Ghana Cocoa Board (COCOBOD), Joseph Boahen Aidoo, has attributed the organization’s GH¢2 billion loss in 2021 to the decline in the international market price of cocoa.
He noted that the price of cocoa on the global market has experienced a significant drop of over 30% in recent years, contributing to the substantial loss incurred.He explained that the cocoa sector in Ghana performed poorly between the periods 2017 and 2020 because the prices on the world market had collapsed by 30%.
In 2017, cocoa prices were in a meltdown, hitting a four-year low due to an abundant supply and weakening demand as growing health consciousness grips consumers.
Benchmark cocoa futures on the Intercontinental Exchange in New York hit $2,052 per metric ton on February 3, 2017.
This is the lowest level since March 2013, in an extended year-long decline after 2015′s weather-related rally.
Although production went up in 2020, the prices were not optimal on the international market, a situation that affected the local market as well.
“In 2020, that is also when we had our highest reduction, so when prices collapsed at the time when we had increased yield, definitely, your direct costs and inventory go up whereas the revenue generated goes down.
“That is what explains the huge deficit for that period. Essentially, yes, we had record production, but prices on the international market did not favor us,” he clarified.
Answering questions before the Public Accounts Committee (PAC), Mr. Aidoo addressed measures being considered to recover from these losses and return to profitability.
He assured that plans are well underway to address the challenge
s posed by the declining cocoa prices and implement strategies to mitigate further losses.
“Chairman, we are on the path of a turnaround. COCOBOD’s financial situation is dictated by the international market price, that’s the world cocoa price, and we all know that from 2017 to the date in question, the price of cocoa in the world market has collapsed by 30%. And in 2020, that is also when we had our highest production.
“So when prices collapsed at the time when we had increased yield. That is, the direct cost and inventory go up whereas the revenue generated goes down. That is what explains the huge deficit for the particular year.
Essentially, yes, we had record production, but the prices on the international market did not favor us,” he stated.
Mr. Aidoo informed the Committee that cocoa prices are currently performing well on the international market, hence Ghana is expected to soon experience a better local market.
However, in case of price drops, measures including cutting operational costs have been taken to deal with the effect.
Cocoa prices have been skyrocketing lately due to a “perfect storm” of poor harvests and a record $8.7 billion bet by hedge funds.
This has driven cocoa prices to all-time highs, doubling from the first quarter last year.
While the initial surge was caused by adverse weather and disease in cocoa-producing regions, the influx of hedge fund investments has intensified the price spike.
On February 12, cocoa prices reached a record-high level trading at $6,030 per tonne.
In the next days, cocoa prices slightly retreated but still hovered quite close to the $6,030 per tonne figure.
Cocoa futures prices have surged more than $1,000 or nearly 40% since the start of the year.
The correction comes as concerns grow over the potential impact of record prices on demand, leading to a wave of long liquidations.
The pullback suggests that the market is adjusting after entering overbought territory.
Bad weather conditions have taken a toll on the cocoa crops in West Africa, which produce 75% of the global cocoa beans supply.
The El Nino weather phenomenon that affects cocoa cultivation areas since January is expected to last through March 2024.
It has brought drier temperatures in the region, hurting crop yields in two of the largest cocoa producer countries in the world, Ghana and Ivory Coast.
