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Ghana: Mills Cheating Cocoa Farmers

Issah Alhassan, Linda Kotey and Stephen Odoi Larbi

11 November 2009

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The member of Parliament (MP) for the Kwadaso constituency in Kumasi, Dr. Owusu Afriyie Akoto, has sternly criticised the government of the National Democratic Congress (NDC), under Prof. John Evans Atta Mills, for aggravating the woes of cocoa farmers in the country.

The ranking member of the Parliamentary Select Committee on Food, Agriculture and Cocoa Affairs, says in spite of attempts by the government to justify the new price as favourable, there is widespread skepticism about the impact, regarding the revision on future production, and export earnings for the country.

Assessing the new cocoa producer price announced by the government in mid-October this year, and its impact on the nation's economy in an interview with The Chronicle, the former Chief Economic Advisor for the International Coffee Organisation (ICO), said a critical analysis of the new price, compared with the previous amount received by farmers under the Kufuor administration, and also the amount paid by neighbouring countries, it would be evidently clear that the government has not dealt fairly with cocoa farmers in the country.

He said a further look at the new price, from the perspective of the percentage share of the market price and the level of extension services provided to the farmers by the government, it does not provide the required incentives for the poor farmer in the country.

According to him, it would neither inure the welfare of the farmers, nor provide adequate motivation to them to expand production, in order to achieve the required target of one million metric tonnes per annum, by the year 2011/2012.

Dr. Owusu Afriyie noted that in October 2008, when the world market price of cocoa was around US$2,300 per metric tonne, the government of the day announced a producer price of GH¢1,632 per metric tonne, at the exchange rate of GH¢1.14 per US dollar, meaning that farmers were paid 62.8 percent of the world market price.

The Kwadaso MP, however, said the new price of GH¢2.208 per metric tonne, at the exchange rate of GH¢1.50 per US dollar, meant that the new producer price was equivalent to US$1,472, indicating that the figure only represented US$28 or 1.9 percent more than the equivalent US dollar value a year ago.

Dr. Owusu Afriyie also disputed the government's claim that it had increased the amount by 71 percent, insisting that the increase amounted to only 43.9 percent of the world market price.

"In the second half of October 2009, the price remained above US$3,350 per metric tonne, this means that when account is taken of exchange rate variation, the new price awarded in 2009 is barely different from that awarded last year October 2008. When the new reality of the unfolding bull market in the global cocoa industry is taken into account, the Ghanaian cocoa farmer is far worse off now than a year ago," he said, and warned that the situation could compel more farmers to sell their products to the outside market.

In analyzing the economic cost of the new price to the country, the MP said the negative effects of inadequate product price, and the disruption in the cocoa spraying programme, are bound to cause further delays in reaching the production target of one million metric tonnes of cocoa.

"The target was originally expected to be achieved by the 2010/2011 season. Now, there is little chance of that happening, and the potential loss to the economy is enormous, in particular, the loss in rural income, employment, internal trade, exports and foreign earnings," he posited.

Answering questions in parliament yesterday, a Deputy Minister of Finance, Fifi Kwetey, stated that the former government paid 70.46% of the net FOB price of cocoa to farmers in the 2008/09 crop season, and that in the current 2009/2010 season, the NDC government had paid 71.06% of the net FOB price.

This, he said, clearly shows that the government had started paying at least 70% of the world market price.

The Deputy Minister noted that Ghana's cocoa is sold at the world forward sale price, whereas the average of the prevailing spot world market prices are normally used in the computation of the share of the FOB price for the farmers.

The Deputy Minister said this when he was responding to an urgent question posed by the MP for Kwadaso, Dr. Owusu Afriyie, on when cocoa farmers in the country will be paid at least 70% of the world market price of cocoa, in view of the sharp depreciation of the cedi against the US dollar, and the recent rise in the price of cocoa on the world market.

Fiifi Kwetey mentioned that for the 2008/09 season, the per tonne price paid to cocoa farmers, stood at GH¢1.532 million and for this year per ton price to cocoa farmers is GH¢2.208 million.

"So what is paid to the farmers this year is far more than what was paid last year."

Responding to a question on how much the farmers were getting in terms of dollars, he said over the years, efforts had been made to stop the over dollarisation of the economy, as such, cocoa prices to farmers have always been quoted in its cedi equivalent, and not dollars.

"The dollar equivalent can easily be computed, but I don't have the figures now."

According to him, the government was not only paying 71% plus to farmers, but they are also consolidating the value of the cedi, and creating mechanisms that would make the cedi appreciate, so that the overall benefits to the farmer would be much better.

Early last month, the opposition New Patriotic Party (NPP) called for an upward adjustment of Cocoa Producer Prices, to reflect that of the international market, since the price being made to the farmers was below what was due them, compared to same in the previous year.

In 2008, a bag of cocoa (FOB) sold for the equivalent of GH¢162 on the international market.

The producer price of cocoa, that is the price with which COCOBOD bought cocoa from farmers to sell internationally, was GH¢102 per bag, representing 63% of the FOB price or 70.5% of net FOB.

At the time of making that demand, cocoa was selling at GH¢314 on the international market, and still rising, aggravating the opposition's demand for the FOB price of GH¢198 percent per bag, as against GH¢102 percent.

The government, in response to this plea, increased the amount from GH¢1,632 per tonne to GH¢ 2, 208.00, representing 71.06% of the net FOB price, effective October 14th, 2009.

The figure therefore translates into GH¢138,000 per bag of 64 kilogram gross weight, and a 35.29 percent increase of the previous price.

The Deputy Minister also told the House that the attention of government had been drawn to the fact that monies had been paid to members of the gang carrying out mass cocoa spraying exercise.

Responding to a question on why allowances had been paid to the new cocoa spraying gang members for the month of June, when in actual fact, no work was done, Mr. Kwetey, reiterated that not only in the cocoa sector, but in all sectors of the economy, if it comes to their knowledge that people are being paid while no work is being done, appropriate sanctions would be applied."It should not be a difficult at all."

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