Author: Dr. John Osae-Kwapong, Democracy and Development Fellow, CDD-Ghana, and Project Director, the Democracy Project
In an unprecedented move, the government reduced the producer price of cocoa for the 2025/26 season by 29% from GH¢3,625 per bag to GH¢2,587 per bag. The government explains that this was a difficult but necessary decision given the current price of cocoa on the world market and other challenges facing COCOBOD.
If you are a cocoa farmer like my mother, it is a difficult and painful pill to swallow because this decision requires adjusting your income expectations. The change in expected income has further consequences for the farmer. If you are the government, this decision represents adjusting revenue expectations and figuring out how to finance the operational costs of COCOBOD.
It is easy for critics to label any attempt to explain the political, fiscal, and economic realities facing COCOBOD as justification for the government’s action. However, it is in recognizing these realities that collectively, the consequences of our historic approach to managing a highly prized export commodity can be dealt with.
The Government’s Decision
In my view, the government had to choose between two competing alternatives. The government could have chosen political expediency (Option One) by keeping the producer price (GH¢3,625) announced at the beginning of the season.
This choice is politically safe because it does not incur the wrath of cocoa farmers. It also prevents the political weaponization of the producer price by the main opposition party. However, political expediency requires finding the money to pay for it. How was the government going to do that given the fiscal realities of COCOBOD?
The second option was the difficult fiscal decision to reduce the cocoa producer price. The decision, although politically unsafe, and the reaction of some point to this fact, force the government to deal with both the immediate and long-term challenges of COCOBOD.
Let us not forget that as part of the most recent International Monetary Fund (IMF) bailout, COCOBOD was one of the institutions flagged as needing reforms because of the risks it posed to the government’s finances. It is the reason why a COCOBOD Turnaround Strategy paper was developed in 2023.
To reiterate my point, the government could have chosen political expediency, maintained the original price, and ignored the fiscal consequences. Alternatively, it could also accept the economic and fiscal realities of the current situation and act accordingly by reducing the producer price.
Governing is about choices and most of the time requires choosing between competing alternatives. The latter choice (reducing the producer price) is unpleasant for the cocoa farmer, but a prudent government action given the current circumstances.
The Politics of the Cocoa Producer Price
The cocoa producer price is regularly subject to politics. I do not recall a time when a government has not patted itself on the back for the price offered to cocoa farmers. Even in seasons where the price has been maintained or adjusted marginally, governments give themselves loud applause.
In the same vein, I also do not recall a time when a party in opposition has applauded a government for the cocoa producer price. The response is always “the government could have done better, and given the chance, we would treat the farmer differently.”
Some of the backlash greeting the government’s decision is precisely because of pronouncements made while in opposition, sometimes arguing and implying that the previous government was shortchanging cocoa farmers.
It is tempting to say our two main political parties, at some point, must recognize that the repeated cycle of politics with the cocoa producer price only achieves one thing – which party can reap the most political dividends in terms of votes from the cocoa farmer. It does not help us deal with the medium-to-long-term challenges facing COCOBOD.
I understand the reaction of the main opposition party to the government’s decision to reduce the producer price. It was not too long ago that, while in power, they were made to feel political heat over the price being offered to the farmer. But I also ask myself how the demand to keep the original price will be paid for.
Anyone who has studied the producer price formula for cocoa over the years and matched it against whatever price is announced will notice that governments have never really allowed it to “work” the way it is truly designed to work.
I’ve always been intrigued that a pricing formula that has the exchange rate as a key component only sees producer price movements in one direction, regardless of periods of depreciation or appreciation of the currency.
The Proposed Reforms
The COCOBOD Turnaround Strategy (2023) contains several proposed ideas on how best to turn the fortunes of COCOBOD around. The government also announced various steps it is taking to address the crisis. Hopefully, these steps will be implemented with the commitment that cocoa farmers and the sector deserve.
READ ALSO: Use Cocoa Crisis to Reset Public Sector Compensation – CDD-Ghana Boss
