Minority calls on govt to increase cocoa price
The Minority in Parliament has urged the government to increase the producer price of cocoa from the current GH¢3,392 per metric tonne to GH¢5,103, equivalent to a rise of 50.4 per cent.It has also called for a restoration of the policy of awarding cocoa farmers 70 per cent of the free on board (FOB) price.
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Addressing a press conference in Parliament House yesterday, the Minority Spokesperson on Food and Agriculture, Dr Owusu Afriyie Akoto, said the raging furore over the collapsing fortunes of the cedi since late last year had brought into sharp focus the issue of the price paid to cocoa farmers.
He said last October, the government announced its decision not to increase the price paid to cocoa farmers in the current 2013 /2014 cocoa season with the explanation that there was a decline in the price of cocoa on the international market.
He said a close examination of cocoa prices on the international market for the relevant marketing periods, however, did not confirm a drop in dollar prices to justify such a punitive decision against cocoa farmers.
“On the contrary, the sharp devaluation of the cedi in 2013, was a strong basis for an increase in the local price paid to cocoa farmers. The incomes of cocoa farmers were already undermined by the fact that in the previous year they had been awarded only a token increase of five per cent against a domestic inflation rate of about 10 per cent at the time and 13.8 per cent currently. With rising interest rates, exchange rate depreciation and the widening fiscal deficit, inflation is likely to rise further in the coming months,” he said.
Export prices and the farmer
Dr Akoto said the recent collapse of the cedi against the major trading currencies had, at a stroke, thrown out of the window the long-held government policy of awarding cocoa farmers a minimum 70 per cent of the FOB price of the crop.
At current world prices, he said, the FOB price of Ghana cocoa was $2,700 per metric tonne.
“At the current dollar to the cedi rate of GH¢2.70 to the dollar, the FOB price is equivalent to GH¢7,290 per metric tonne. This compares to the current fixed price paid to the farmer of GH¢3,392 per metric tonne, equivalent to only 46.6 per cent of the stipulated FOB price of cocoa. Hence at the current prices, the cocoa farmer in Ghana is paid less than half of the current FOB price, contrary to the government’s own avowed target of a minimum of 70 per cent.
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Reduction in production
Dr Akoto said declining real producer prices, combined with rising costs of production, meant shrinking income incentives and consequent reduction in production.
“No wonder, after hitting a historic one million metric tonnes in 2010/2011, cocoa production has steadily retreated to about 800,000 metric tonnes per annum. The peak production of one million metric tonnes in 2010/ 2011 was a direct result of policy initiatives undertaken by the NPP administration from 2001. If the current negative economic conditions on cocoa farms persist, the reduction in production and exports is likely to continue in the coming years,” he said.
Cocoa smuggling
Dr Akoto said the reduced price incentives and the withdrawal of subsidised fertilisers and pesticides were not only having a negative impact on cocoa production but also encouraging the mass smuggling of cocoa across national borders to Cote d’Ivoire and Togo.
He said reports from the border areas indicated that a 64-kilogramme bag of cocoa was selling at GH¢240, compared to GH¢212 in Ghana.
The continued depreciation of the cedi, he added, would encourage more smuggling of Ghana’s cocoa to neighbouring countries.