For the first time since at least 2020, Ghana has reduced the cocoa farmgate price by 28 per cent in response to falling global prices and mounting payment arrears owed to farmers.
The reduction, which forms part of a broader reform package in the cocoa sector, has raised concerns among stakeholders, particularly over how outstanding payments to farmers would be settled amid the liquidity challenges facing the Ghana Cocoa Board (COCOBOD).
Announcing the reforms, the Minister of Finance, Cassiel Ato Baah Forson, assured farmers that the government had taken steps to clear all outstanding arrears.
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“Cabinet has directed COCOBOD to commence immediate payment of all affected cocoa farmers,” Dr. Forson stated.
However, questions remained over the source of funding for the payments, given COCOBOD’s financial difficulties in recent years.
Government Steps In to Cover Losses
Providing clarity on the issue, the Deputy Minister of Finance, Thomas Ampem Nyarko, disclosed that the government would absorb losses expected from cocoa beans already supplied but not yet paid for.
Speaking on Top Story on Joy FM, Mr. Nyarko explained that about 50,000 metric tonnes of cocoa had been delivered by farmers before the price reduction.
As a result, government has agreed that farmers will be paid at the previous rate of slightly above US$5,200 per tonne.
Because current market prices are significantly lower, COCOBOD is expected to incur heavy losses on the transaction.
“There are some 50,000 tons of cocoa that farmers have already supplied. The government has agreed to pay them the price that was agreed earlier. That means COCOBOD is going to make huge losses of about US$150 million, and the government is absorbing that cost,” he said.
Relief for Farmers Amid Price Cuts
The decision is expected to bring some relief to cocoa farmers who have faced delayed payments in recent months.
Analysts say the move demonstrates the government’s commitment to protecting farmers’ incomes despite the challenges posed by declining global cocoa prices.
However, concerns remain about the long-term sustainability of COCOBOD’s finances, especially following the recent reduction in producer prices and ongoing sector reforms.
Stakeholders are calling for stronger financial restructuring and improved funding models to prevent future arrears and ensure stability in the cocoa industry.