This decline occurred despite an unprecedented nearly 200% increase in the global price of cocoa, which surged from about 4,235.60 in just December 2023 to between $10,116.9 and $12,261 per tonne in April 2024.
Ghana's cocoa export earnings have fallen dramatically, dropping by 49% to US$599.3 million in the first four months of the year compared to the same period last year, according to the Bank of Ghana.
This decline occurred despite an unprecedented nearly 200% increase in the global price of cocoa, which surged from about 4,235.60 in just December 2023 to between $10,116.9 and $12,261 per tonne in April 2024.
Ironically, the significant rise in cocoa prices on the international market is attributed to a notable production decline in major producing countries like Ghana. Ghana's cocoa production plummeted from a record high of over 1 million tonnes in the 2020/2021 crop season to between 492,000 tonnes and 580,000 tonnes in the 2023/2024 season.
Various factors have been cited for the declining cocoa production in Ghana. A statement from the Ghana Cocoa Board on January 12, 2024, highlighted "unbridled and unmitigated age-old challenge of cocoa smuggling to neighboring Cote d'Ivoire and Togo" and the rampant threat of illegal small-scale mining (Galamsey) as significant issues. These activities have wreaked havoc on Ghana's cocoa landscape and drastically reduced revenue from cocoa trade, the statement noted.
Climate change and related factors, such as unpredictable rainfall patterns and rising temperatures, have further exacerbated the situation. Droughts have left trees parched, while excessive rain has created breeding grounds for fungal diseases like Swollen Shoot, a devastating virus that spreads rapidly through plantations and ultimately kills cocoa trees, leading to significant drops in yield.
High input costs, particularly for fertilizers that were previously supplied to farmers for free, are another contributing factor. Kwame, a cocoa farmer in Asutware, recalls simpler times when a bag of fertilizer cost around 200 cedis. Today, due to global shortages and a weakening cedi, the same bag costs 280 cedis--a 40% increase. This rise in input costs cuts into profits, making farmers anxious about future harvests.
The significant drop in cocoa production and export earnings is one of the reasons for the cedi's depreciation by 14.6% on the interbank market and over 19% on the retail market since the beginning of the year.
"The exchange rate pressures witnessed in recent weeks reflect a weakening of the current account surplus, due to higher import demand and lower export revenue, especially a sharp fall in cocoa export earnings," Dr. Ernest Addison stated at a post-Monetary Policy Committee press conference on Monday, May 27, Central Bank Governor.
Bloomberg echoed this sentiment in April, attributing the decline in dollar supply to a slump in cocoa earnings, with exports dropping by nearly a third to $508 million in the first two months of the year due to adverse weather, disease, and fertilizer shortages.
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The drop in cocoa production also has implications for Ghana's forex inflow. The annual syndicated loan, which used to bring in close to $1.5 billion, might only bring the $800 million secured last year or even less, depending on final production volumes. The government struggled to secure the $800 million loan last year. According to a Reuters report on May 26, 2024, COCOBOD has since withdrawn $600 million and canceled the remainder, as this season's cocoa output is seen almost 40% below forecast and unable to guarantee the full loan.
Meanwhile, other exports, including non-traditional exports, also decreased by 6% to US$981.8 million.
