By Alex Ababio
For the first time since at least 2020, Ghana has reduced the cocoa farmgate price by 28% in response to falling global cocoa prices and mounting payment arrears owed to farmers—an unprecedented move that has sent shockwaves through the country’s cocoa-dependent economy.
In announcing the reduction, alongside a broader set of reforms, Finance Minister Cassiel Ato Forson assured cocoa farmers that the government would settle outstanding arrears.
“Cabinet has directed COCOBOD to commence immediate payment of all affected cocoa farmers,” he said.
What was not fully clarified at the time, however, was the source of funding—particularly given the well-documented liquidity challenges facing the Ghana Cocoa Board (COCOBOD) in recent years.
Days later, speaking to journalists in Accra, Deputy Finance Minister Thomas Ampem Nyarko disclosed the financial mechanism behind the decision: the government will absorb losses estimated at $150 million that COCOBOD is expected to incur from purchasing about 50,000 metric tonnes of cocoa beans already supplied by farmers but not yet paid for.
“There are some 50,000 tons of cocoa [that farmers have already supplied]. Government has agreed to [pay] the farmers the price that was agreed with them earlier. That means COCOBOD is going to make huge losses of about $150 million. Government is absorbing that cost,” he said.
The Numbers Behind the Crisis
Because the 50,000 metric tonnes were delivered before the farmgate price reduction, farmers will be paid the previous rate of a little over $5,200 per tonne. At current global market conditions, this price is significantly above what COCOBOD can recoup through international sales.
At prevailing exchange rates, the $150 million loss translates to roughly GHS 1.6 billion—a substantial fiscal commitment at a time when Ghana remains under an International Monetary Fund (IMF) programme and is pursuing fiscal consolidation measures.
The cocoa sector is a cornerstone of Ghana’s economy. The country is the world’s second-largest cocoa producer after Côte d’Ivoire, and cocoa exports account for a major share of foreign exchange earnings. According to data from the World Bank, cocoa contributes significantly to rural incomes, supporting an estimated 800,000 farming households.
Yet in recent years, COCOBOD has struggled under mounting debt, declining output, and global price volatility. Public financial reports show that the regulator has relied heavily on syndicated loans from international banks to finance annual cocoa purchases. Industry analysts have repeatedly warned about rising debt service costs and operational inefficiencies.
Falling Prices, Mounting Arrears
The government’s 28% reduction in farmgate prices marks a dramatic reversal of policy. In previous seasons, Ghana maintained relatively high farmgate prices to discourage smuggling of cocoa beans to neighbouring Côte d’Ivoire, where farmers sometimes received better rates.
But global cocoa prices, after reaching historic highs in 2024 due to supply shocks in West Africa, have since softened. International buyers and grinders have cited reduced demand and price corrections on the London and New York futures markets.
An industry analyst at the International Cocoa Organization noted in a recent market report that while structural supply constraints persist, speculative spikes in prices have cooled, forcing producing countries to recalibrate domestic pricing structures.
In Ghana, that recalibration came at a cost. Farmers had already delivered beans based on the earlier, higher price. Payment delays—some stretching for weeks—triggered anxiety among rural households already grappling with rising input costs, climate variability, and currency depreciation.
By committing to pay the previous rate for the 50,000 tonnes, the government aims to restore trust and prevent social unrest in cocoa-growing communities.
A Fiscal Gamble?
Absorbing a $150 million loss may stabilize farmer relations in the short term, but it raises serious questions about fiscal sustainability.
Ghana is operating under a $3 billion IMF-supported programme aimed at restoring macroeconomic stability following a severe debt crisis. The IMF has emphasized expenditure discipline and structural reforms across state-owned enterprises.
Economists say the decision to absorb COCOBOD’s losses underscores the political sensitivity of cocoa pricing. “Cocoa is not just an export commodity; it is a social contract between the state and rural Ghana,” said a senior economist at the University of Ghana, who requested anonymity due to the sensitivity of the issue.
The GHS 1.6 billion equivalent of the absorbed loss represents resources that could otherwise support infrastructure, health, or education spending. Critics argue that without deeper reforms at COCOBOD, such interventions risk becoming recurring bailouts.
Structural Weaknesses at COCOBOD
Public documents and parliamentary committee reports over the past three years have highlighted operational inefficiencies within COCOBOD, including high administrative costs and questions around procurement practices.
The Parliament of Ghana has previously scrutinized COCOBOD’s borrowing arrangements and forward sales contracts. While such contracts are standard in the global cocoa trade, they expose the regulator to price risk when market conditions shift dramatically.
Furthermore, Ghana’s cocoa production has declined from peaks above 1 million metric tonnes to significantly lower levels in recent seasons, partly due to aging farms, illegal mining (galamsey) encroachment, and the spread of cocoa swollen shoot virus disease.
The combination of lower output and volatile prices has squeezed COCOBOD’s margins.
Farmers Caught in the Middle
For cocoa farmers, the immediate concern is payment certainty. Many depend on seasonal cocoa income to pay school fees, healthcare bills, and reinvest in their farms.
By honoring the earlier price agreement for the 50,000 tonnes already supplied, the government is signaling that contractual commitments will be respected—even at fiscal cost.
But the 28% reduction going forward could dampen farmer morale and potentially incentivize cross-border smuggling if price differentials widen again.
A farmer cooperative leader in the Ashanti Region told local radio that while members welcome the settlement of arrears, “the price cut will affect our planning for the next season.”
Political and Economic Calculus
Finance Minister Cassiel Ato Forson framed the decision as part of a broader reform package. While details of those reforms remain limited, government sources suggest they may include tighter cost controls within COCOBOD and revised financing structures.
Deputy Minister Thomas Ampem Nyarko’s confirmation that government will absorb the $150 million loss indicates Cabinet-level consensus on shielding farmers from retroactive price adjustments.
The move also comes at a politically delicate time. Cocoa-growing regions are electorally significant, and farmer dissatisfaction has historically carried political consequences.
The Road Ahead
The immediate payment directive may calm tensions, but deeper questions remain:
How will COCOBOD manage price volatility in future seasons?
Will the government introduce hedging reforms or transparency measures?
Can Ghana sustain high farmgate prices without jeopardizing fiscal targets?
Industry observers argue that long-term solutions must include farm productivity improvements, disease control, climate resilience strategies, and stricter cost discipline within COCOBOD.
For now, the government’s decision to absorb $150 million in losses buys time—and political goodwill. But it also underscores the fragility of Ghana’s cocoa economy in an era of global price swings and domestic fiscal strain.
As Deputy Minister Thomas Ampem Nyarko put it plainly: “Government is absorbing that cost.”
The question now is whether the cocoa sector’s underlying structural challenges can be addressed before another crisis forces an even more expensive intervention.