Ghana’s cocoa purchases smooth under new funding model, Cocobod CEO says
By Maxwell Akalaare Adombila
ACCRA, Nov 4 (Reuters) -Cocoa purchases in the world's number two producer Ghana have been smooth and orderly in the 2024/25 crop season under a new funding model that requires global traders to pay upfront for part of bean shipments, the head of the sector regulator Cocobod said on Monday.
Starting in September, Cocobod replaced a previous three-decade-old system where the regulator financed bean purchases from farmers with an annual syndicated loan from international banks.
The old system meant that any delays in loan disbursements would ripple through the entire sector, leaving growers starved of funds and encouraging bean smuggling.
Cocobod CEO Joseph Aidoo told media that beyond savings in interest, the new model had eliminated delayed payments to licensed cocoa buyers (LBCs), ended the borrowing of beans from farmers and improved buyers' turnaround time and profits.
Under the syndication, Ghana was using between 50-80% of a season’s output as collateral for the loans and disbursement delays were creating a debt cycle in the cocoa sector, Aidoo said.
He said the current model was more flexible, requiring licensed buyers to use their own funds or money sourced from their partner traders to purchase cocoa from farms for Cocobod to deliver to global buyers.
"When the LBC delivers the cocoa to us, we alert the trader and start shipment processes. Once we prepare the bill of lading, the trader pays for the consignment, and we disburse that money to the LBC to start purchasing again. It’s good for everyone," Aidoo said.
While the departure from the old, familiar system raised concerns it could cause initial disruptions, Aidoo said there have been no complaints from farmers about delays in payments for their cocoa.
Poor harvests and increased smuggling in 2023/24 caused Ghana to miss on delivery of beans, giving trading houses losses of at least $1 billion on cocoa derivatives.
This season, Ghana sees output recovering to 650,000 metric tons. Rebuilding of disease-infested farms, increased pruning and hand pollination should help sustain its cocoa sector, Aidoo said.
Reporting and writing by Maxwell Akalaare Adombila; additional reporting by Christian Akorlie; Editing by Anait Miridzhanian and Tomasz Janowski
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
