How does the cocoa market in Ghana work?

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In the last blog post we explained how the world market price for cocoa is formed. Now you're probably wondering which factors influence the price paid to the cocoa farmers* of our partner cooperative Yayra Glover? And what do fluctuations of the world market price mean for cocoa farmers? Let's continue with some concise answers!

Is the world market price the price that is also paid to the Ghanaian cocoa farmers?

No! The so-called farmgate price is the price paid to cocoa farmers in exchange for cocoa beans. This means that no transport costs or similar additional costs are included, it is only the pure net value of the cocoa beans. nen.

Since the price is a fixed price, it cannot be negotiated individually. Currently, the price set by the marketing platform COCOBOD is 480 cedis per 62.5 kg bag (equivalent to about US$ 100).

This price, which is immensely important for cocoa farmers, is set twice a year by a committee consisting of the before mentioned Ghanaian marketing platform COCOBOD, cocoa farmers and the Ministry of Finance.

Aspects that play a role are expected harvest volumes, the price of pre-sales and costs of middlemen, transport companies and quality controls and the internal expenses of the state institution COCOBOD that have to be covered.

Afterwards, the percentage of this price that is directed to the cocoa farmers* is set. The rest is used for the just mentioned expenses of COCOBOD. On average, the farmgate price accounts for about 70 percent of the world market price. Sounds complicated? It is!

 

 

What effects would the collapse of the cocoa price have on cocoa farmers?

A collapse of the world market price for cocoa has fatal consequences for cocoa farmers*, as the national cocoa market price set by COCOBOD is determined by the the world market price.

For instance, if the farmgate price falls drastically (due to a falling world market price) and the cocoa farmers* have no possibility to wait to sell their beans, they suffer from heavy price losses. And indeed, most cocoa farmers have to sell their harvest right away, as they are highly dependent on this source of income. Consequentially, they often find themselves in a severe financial situation.

Who exactly is COCOBOD?

The Ghanaian cocoa market cannot be explained without COCOBOD. So stay curious about the following explanation! COCOBOD is the national Ghanaian marketing platform for cocoa, coffee and shea nuts and was founded by the Ghanaian government in 1947.

The aim is to stimulate and simplify the production, processing and marketing of high-quality Ghanaian beans and nuts. What is most important to us is that COCOBOD is responsible for cocoa production and distribution.

These are the main functions: production, quality control, internal and external marketing, research and development. Cocoa exports are handled by the Cocoa Marketing Company (CMC), a sub-organization of the state-owned COCOBOD. Since COCOBOD does not only take over all these functions, but also sets the cocoa price, there is no way to avoid working with COCOBOD.

What does COCOBOD do for the Ghanaian farmers*?

Make up your own mind! There are many advantages and some disadvantages to consider.

PRO:

- Pest control through pesticide distribution by the Cocoa Health and Extension Division (CHED)
- Teaching of good agronomic practices
- Research by the Cocoa Research Institute of Ghana (CRIG)
- Distribution of seedlings by the Seed Production Division (SPD)
- Quality control by the Quality Control Company (QCC)
- Sales and price control by the Cocoa Marketing Company (CMC)

CON:

- No direct trade with cocoa farmers* possible, as the farmgate price is fixed.
- Lack of transparency regarding public expenditure

 

And what does light crop and light crop discount mean?

Now that you know the difference between world market price, farmgate price and COCOBOD, we come to the actual purchase of cocoa beans. The Ghanaian cocoa harvest consists of two cycles in which different beans are produced - the crops of the light and the main season.

The harvest of the light crop is significantly shorter compared to the main crop harvest and the volume is smaller. The harvest of the main-crop season is mainly exported, while the price for the light-crop harvest is reduced for local grinders by the light crop discount (approx. 15 percent less than the world market price).

COCOBOD also sets the prices here. Licenced buying companies buy cocoa beans at the price set by COCOBOD. One of these and and on top of that an organic company is Yayra Glover, from whom we buy our organic cocoa beans. And how are the beans differentiated? You won't believe it, but they are counted by hand in order to determine their type!

Table 1: Quantity of beans and categorization of beans

Amount of beans Category
> 90 beans for 100g super main crop
91-100 bean for 100g main crop
101-110 beans for 100g super light crop
111-120 beans for 100g light crop

Source: Data from our organic cooperative Yayra Glover

And why is this important? The cocoa beans with a smaller volume - the light crop harvest - naturally have more shell and thus make more waste and are therefore less popular.

And how do we handle the premiums - how are the premiums distributed?

Since we buy organic cocoa beans, we pay a $600 bonus per tonne of cocoa to our partner cooperative Yayra Glover in order to guarantee cocoa farmers a fair wage. Yayra Glover then pays the premium to the cocoa farmers*. In addition, Yayra Glover invests parts of the premiums in further training and certifications.

As you can see, there is a lot of economics and politics behind your favourite chocolate, too. If you have any further questions on this topic, please take a look at our FAQ.

Until then, after so much nerve-wracking reading, you'll find nourishment Made in Africa here!