As Ghana’s annual production figures continue to decline, galamsey, climate concerns, illnesses, and smuggling activities forced the country’s cocoa export revenue to fall by more than $500 million in the first quarter of 2024.
The decline is shown in the Bank of Ghana’s May 2024 Summary of Macroeconomic and Financial Data. The cedi is currently weaker than other major trading currencies, having lost almost 20% of its value versus the US dollar since the year’s beginning.
According to figures from the Bank of Ghana, cocoa export earnings fell sharply, from over $1 billion in the first quarter of 2017 to about $496 million this year. The level is at its lowest point in almost nine years.
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According to a report by Bloomberg, “the currency of the world’s second-biggest cocoa producer depreciated 0.2% to 14.9335 per dollar by the close of trading in Accra [yesterday], the lowest level since at least 1994 when Bloomberg began compiling the data.”
The article also stated that the cedi is currently “the fourth-worst performer among roughly 150 currencies tracked by Bloomberg worldwide, after the Egyptian Pound, Nigerian Naira, and the Lebanese Pound” due to its fast fall against the US dollar.
Falling cocoa and cedi difficulties
Ghana’s economy has been based primarily on cocoa since the colonial era and is considered a crucial commodity there. Put simply, when cocoa “coughs,” Ghana’s economy—particularly the cedi, the country’s currency—coughs up a cold. The country’s external payments situation has really been impacted by Ghana’s lower cocoa harvest in 2023–2024, as the country’s trade surplus dropped by more than half in the first two months. This puts the cedi’s exchange strength at risk, as it has lost more than 20% of its value compared to the US dollar.
The West African country’s trade surplus decreased by 54% from the previous year to $392.8 million for January–February 2024, according to new data from the Bank of Ghana, and revenue from cocoa exports fell by a significant margin.
The Ghana Cocoa Board estimates that the country’s cocoa harvest for the 2023–2024 season, which concludes in September, will be between 650,000 and 700,000 tons, down from an early projection of 850,000 tons. On the other hand, industry insiders claim that unfavorable weather, illness, a lack of fertilizer, and illicit mining activities in cocoa-growing regions might cause predicted yields to drop below 500,000 tons.
Furthermore, the world’s second-largest cocoa producer may lose roughly 200,000 tons due to an increase in bean smuggling to neighboring countries at comparatively higher prices. This will likely hinder its ability to obtain the necessary assurances about the quality of the beans in order to attract larger loans from the cocoa syndication program.
Ghana Cocoa Board (COCOBOD), the industry watchdog, is aware that smuggling is drastically lowering its proportion of the world’s cocoa production, which has decreased from 20% to 13%. Ghana’s anticipated harvests are expected to be threatened by illegal mining activities, making the upcoming agricultural season difficult. Ghana’s cocoa production for the 2024–25 season is in jeopardy, since it may dip below 400,000 tons due to the sale of cocoa fields to illicit miners, pollution, and land and water body degradation.
In order to obtain its next cocoa syndicated loan, COCOBOD must reassure investors that it can ensure bean production to meet the $1.5 billion loan target. The regulator’s original goal for this year was cut from $1.2 billion to $800 million, of which it could only supply beans for $600 million. The remaining $200 million had to be canceled since COCOBOD was unable to supply the beans needed to support it.
Ghana must demonstrate to investors that it can grow more beans in the upcoming season in order to receive more from the syndication exercise than it was able to this year. It will be challenging to guarantee the required production of beans, and raising the farm gate price is a dependable measure to stop the smuggling of an extra 200,000 tons the following season. But COCOBOD, which already finds it difficult to meet its present debt obligations, would be severely financially constrained by this.
