The poor performance of the Ghana’s local currency, the Cedi, is impacting on the welfare of cocoa farmers as their receipts have declined significantly in real terms in the 2022/23 crop season.

According to the International Cocoa Organization (ICCO), farm gate prices in US$ terms have been higher in Ghana compared to Côte d’Ivoire over the past six main crops seasons.

“However, the situation was reversed during the main crop of the 2022/23 season mainly due to the sharp depreciation of the Ghanaian Cedis vis-àvis the US dollar.”
ICCO

In its September 2022 cocoa market report, the ICCO disclosed that the producer price of cocoa beans for the main crop of the 2022/23 season in Côte d’Ivoire was announced at 900 XOF/kg, which is equivalent to US$1,364 per tonne while in Ghana, cocoa farmers are expected to receive 12,800 Ghana cedis per tonne, or US$1,251 per tonne for their cocoa beans.

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The analysis of the ICCO was based on an average exchange rate of US$1000 = XOF660 in Côte d’Ivoire and US$1 = GHS10.23 in Ghana from 3^rd to 5^th October, 2022.

The report underscored that the rising costs of production factors are having a higher impact on cocoa processing and chocolate manufacturing process which by far, outweighed the reduction in cocoa prices.

Moreover, the ICCO stated that as a result of the recent inflationary pressure, the weights of energy, capital, sugar and butter milk prices on production costs have become even bigger than those estimated in 2018.

Futures Prices Developments

Down the road from the previous months of the 2021/22 season, cocoa prices further continued their decline in September. In the absence of an immediate supply tightness, over the first half of September, prices lacked support and posted losses on major markets.

During this period, the average total stocks of cocoa beans held in the Exchange licensed warehouses increased year-on-year in both Europe and the United States.

In Europe, the average total stocks of cocoa beans reached 187,832 tonnes, up by 14% from 165,275 tonnes seen over the same period during the 2020/21 season. Concurrently, in the United States, the average total stocks of cocoa indicated a year-on-year increase of 4% moving from 357,500 tonnes during the first half of September 2021 to 371,756 tonnes a year later.

At the time, prices of the front month contract (SEPT-22) dropped by 1% from US$2,062 to US$2,040 per tonne whereas in New York, they tumbled by 3% from US$2,427 to US$2,347 per tonne.

Inflationary pressures affecting demand

As the month progressed, the global inflationary pressures were anticipated to negatively affect demand as consumers continued to be faced with reduced purchasing power. As cited by the European Cocoa Association (ECA), grindings data for Q3, 2022 dropped by 1.6% from a year earlier to 369,679 tonnes.

“In line with the downward trend in Europe, compared to the previous year, Germany’s cocoa grindings fell by 4.7% to 100,149 tonnes. With energy prices pushing other costs higher and the possible rationing of energy in Europe this coming winter, this could take a toll on the operations of cocoa processors.”
ICCO

Regarding supply, the ICCO noted that there were prospects for an abundant start of the 2022/23 crop in Côte d’Ivoire. As the nearby contract rolled over to the DEC-22 contract, from 16^th to 23^rd September, prices of the DEC-22 contract continued to decline on both the London and New York markets.

“In London, it dropped by 5% from US$2,145 to US$2,027 per tonne and by 4% in New York from US$2,355 to US$2,240 per tonne. However, prices reverted from their slide from 26^th September onwards in response to concerns that the heavy rains recorded in Côte d’Ivoire’s cocoa-producing regions could result in the outbreak of black pod disease, which could in turn cause losses for the 2022/23 season.”
ICCO

As a result, prices of the DEC-22 contract moved up by 6% from US$2,030 to US$2,160 per tonne in London and by 5% from US$2,240 to US$2,352 per tonne in New York, the ICCO stated.