Ghana Cocoa Regulator Is Said to Face $280 Million Shortfall

ACCRA (Capital Markets in Africa) – Ghana’s cocoa regulator is facing a 1.25 billion ($285 million) cedi budget shortfall for the new harvest as the world’s second-biggest producer of the beans is keeping farmer pay unchanged even after global prices slumped, according to two people familiar with the matter.

At a forecast crop of 850,000 metric tons for the new season through September, the Ghana Cocoa Board will lose 1,481 cedis per ton after all expenses are paid, said the people, who asked not to be named because they’re not authorized to speak publicly about the matter. 

The regulator will incur the loss even as it plans to cut back on infrastructure spending and fees for authorized buying agents, said the people. Buying-agent fees will be cut by 11 percent to 702 cedis per ton, one of the people said.

The cocoa board is starting purchases for the new crop on Friday and will keep producer prices unchanged from a year ago at 7,600 cedis per ton, Agriculture Minister Owusu Afriyie Akoto told reporters in the capital, Accra. The country is losing $1.1 billion per year due to the fall in prices, he said.

Sharp Fall
“We know there is a sharp fall in the prices of cocoa,” Akoto said on Friday. “We can’t look at the farmer’s face and say we cut prices. We have to encourage the farmers to produce more instead.”

Ghana Cocoa Board Chief Executive Officer Joseph Boahen Aidoo didn’t answer calls or responded to a text message seeking comment. Noah Amenyah, a spokesman for the regulator, didn’t answer calls for comment. Akoto said he was unaware of the regulator’s budget shortfall.

International cocoa prices have slumped by a third over the past year on forecasts of an oversupply, hurting the finances of the biggest producing countries. Ghana is in the third year of an extended credit-facility program with the International Monetary Fund and agreed to bring spending under control after repeatedly missing budget-deficit targets.

Neighboring Ivory Coast, the biggest cocoa producer, cut farmer pay by 36 percent in April to the equivalent of $1,237 per ton and will maintain the reduced price for the bigger of the two annual seasons through March.

Finance Minister Ken Ofori-Atta said Wednesday Ghana can’t afford to keep producer pay unchanged indefinitely.

“We have to decide on whether we are going to have to subsidize, or whether we are going to have to make a decision on reducing the producer price, which is very difficult,” Ofori-Atta said in Washington.

Source: Bloomberg Business News