Ghana’s President John Mahama announced that Cocobod is expected to face a $1.3 billion revenue gap regarding advanced contracts amid economic difficulties. The nation is scheduled to repay $8.7 billion in debts. Despite these challenges, the ICCO forecasts a possible surplus in cocoa production for the 2024/2025 season, although high cocoa prices may strain manufacturers in the chocolate industry.
Ghana’s President John Mahama has reported that the country’s cocoa body, Cocobod, faces a $1.3 billion revenue shortfall due to advanced contracts. This situation emerges amid significant economic challenges, including a severe cost of living crisis in the nation. Ghana is currently obligated to repay $8.7 billion in debts, including about $2 billion owed to Cocobod itself, which currently struggles with debts amounting to 32.5 billion cedis ($2.1 billion).
In his remarks, President Mahama detailed how Cocobod was unable to deliver 333,767 metric tons of cocoa in the 2023/2024 season at £2,600 per tonne, leading to the rollover of these contracts into the next season. The rollover implies a revenue loss of $4,000 per ton of cocoa supplied in the current year. Overall, Cocobod is projected to lose an additional $495 million by fulfilling these contracts. Mahama emphasized that Cocobod failed to leverage potential high market prices that had risen to $12,000 per tonne in the past two years, with current market prices stabilizing between $7,000 and $8,000 per tonne.
Despite these challenges, recent market trends indicate a possible stabilization in cocoa prices, as noted by the International Cocoa Organization (ICCO). Surprisingly, the ICCO forecasts a surplus of 142,000 tonnes for the 2024/2025 season, contrary to previous expectations of ongoing supply pressures. For instance, cocoa arrivals in Côte d’Ivoire have increased by 14.8%, and Ghana’s cocoa warehouse stocks have surpassed the estimated production from the previous season.
However, higher cocoa prices have led to financial strains for many chocolate manufacturers, prompting concerns about future earnings. Companies such as Mondēlez and Hershey have reported the impact of rising cocoa prices on their operational costs, indicating potential price increases for confectionery products. This adjustment may raise sales values while decreasing sales volumes, with consumers becoming more discerning in their purchasing decisions due to tightening budgets. Furthermore, the ICCO has highlighted that the introduction of tariffs presents another layer of uncertainty in the cocoa market, already accustomed to various shocks in recent years.
In conclusion, Ghana’s cocoa sector faces significant challenges due to a $1.3 billion revenue gap attributed to advanced contracts, compounded by national economic issues. However, there is cautious optimism regarding market stabilization, with potential surplus projections for the upcoming season. Nevertheless, increasing cocoa prices are placing pressure on manufacturers, leading to necessary price adjustments that may affect consumer purchasing behavior.
Original Source: www.confectioneryproduction.com
