GHANA’S cocoa sector appears to be on track for a recovery following the precipitous slump in outturn in the 2014/15 season, when output fell by 24 percent to around 700,000 tonnes.
According to a Bloomberg report citing an industry source, state regulator Cocobod’s bean purchases reached 590,000 tonnes by mid-January 2016, up 24 percent from 475,000 tonnes at the same point last season. This would indicate that the strong rebound in deliveries reported at the start of the season in October has continued, although in the absence of official data from Cocobod, any estimates are speculative.
The outlook for the mid-crop is bleaker, after this season’s harsh harmattan blunted the prospects in neighbouring Côte d’Ivoire. Although weather patterns can differ significantly between cocoa-growing regions, Ghana’s crop is unlikely to excel in the unusually dry conditions, further reducing a mid-crop that is already in structural decline.
‘This has serious implications for Ghana’s cocoa grinding sector, which in 2014/15 recorded its lowest outturn in five seasons,’ said an analyst at Ecobank. Grinders depend on the smaller light-crop beans – which are sold to them at a discount of 6-8 percent – to make their profits. ‘But as the light crop has become smaller, some grinders have been forced to import Ivorian beans to make up the shortfall, further eroding their margins,’ the analyst added. The country’s largest grinder, Cocoa Processing Company (CPC), is believed to have accumulated $50 million in arrears to Cocobod for bean deliveries. The grinder has stopped operations, ostensibly to carry out four weeks of maintenance, but it is unclear how it will continue to secure bean deliveries from Cocobod until it clear its arrears.
Meanwhile, world cocoa prices slumped by 13.8 percent in January, tumbling to $2,816 per tonne by the end of the month, their lowest level since April 2015. The sell-off was triggered by traders exiting positions at the start of the year, although price weakness has also been exacerbated by strong deliveries in West Africa, the strength of the US dollar and concerns over weakening global demand for chocolate. However, a strong uptick in grinding in Europe and Asia, coupled with concerns over the mid-crop in West Africa, should prevent any sustained fall in prices which are now close to their five-year average of $2,800 per tonne.