Ghana may struggle to maintain cocoa price for farmers - Cocobod

7/14/2017 10:33:55 PM

Quotes Chief Executive, Joseph Aidoo. 

Ghana's Cocobod could face a challenge next year in maintaining the price at which it buys cocoa beans from farmers at the 2016-17 level if volatility in world prices persists, Chief Executive Joseph Boahen Aidoo told Reuters on Friday.

Ghana, the world's second largest cocoa producer after Ivory Coast, has been reluctant to reduce the price offered to its farmers despite a sharp drop in world prices that have seen cocoa futures plummet by about a third.

"We have a kind of covenant with our farmers not to reduce the minimum guaranteed producer price ... It means it's going to be difficult for the industry, particularly for Cocobod, if prices continue to fall," Aidoo said.

Ghana, which exports up to 90 percent of its beans mainly to Europe on forward contracts, set the minimum guaranteed price offered farmers at the equivalent of about $1,900 per tonne at the beginning of the 2016-17 season in October.

Three farmers in the eastern cocoa region told Reuters on Friday they expected the price to be increased slightly, or at worst stay as it is when the new season begins this October.

"We are used to what has become a ritual. Every year they increase the price so we are looking forward to a top up in October," said Kuma Bento who farms near Tafo. "Reducing the price is out of the question."

Cocobod said in June that, cumulatively, it was paying $400 more per tonne to farmers than the current level of world prices and would be unable to pay bonuses this year.

Aidoo said Cocobod was drawing from a stabilisation fund which might get depleted by next year if prices do not recover.

"The amount in there was just around 320 million cedis ($72.7 million) and that's not enough to make up for the price falls," Aidoo said.

"It means we'd have to engineer some means of supporting our farmers as long as this price fall persists," he said.

Aidoo said Cocobod might borrow an additional $200 million to purchase the 2017/18 light crop if the initial $1.3 billion it is seeking to raise this year from an annual syndicated loan proves insufficient.

The regulator would also complete repayment of $1.8 billion it borrowed last year by the end of July, a month earlier than scheduled, he said, "so we can have a clean slate before we go for the next syndication".

Source: Reuters 

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