Ghana Limits Cocoa Purchases

Ghana, the world's second-largest cocoa producer, plans to limit some cocoa purchases for the upcoming season. This move signals that the severe cocoa shortage, which has driven futures prices to record highs, is not yet over. In a letter to its customers, Ghana indicated that it would determine the amount of certified cocoa beans to be sold based on total production and distribute the beans "fairly" among buyers.

Market Implications

Despite favorable weather conditions and timely supplies of pesticides and fertilizers, Ghana's decision suggests that the next crop might not improve as much as some market observers had anticipated. Cocoa futures traded in New York have set multiple records this year but have fallen more than 30% since their peak in April.

Production Challenges and Projections

Following a sharp decline in production, Ghana had to reschedule at least 250,000 tons of cocoa to the 2024/2025 season starting in October. Both Ghana and the top producer, Ivory Coast, are battling swollen shoot virus disease, which has caused crop losses ranging from 15% to 50%.

However, for the first time in three years, supply is expected to surpass demand. Ivory Coast anticipates increasing its harvest from an estimated 1.8 million tons to 2 million tons by the end of the 2024-25 season. Ghana also expects production to rise from 425,000 tons to 700,000 tons in 2024-2025. If these estimates hold, cocoa bean production could exceed demand by 300,000 tons next season.

Regulatory Actions

The Ghana Cocoa Board (COCOBOD) is now requesting information from buyers interested in purchasing cocoa next season. This includes purchase agreements, shipping plans, and details about the quantity and type of cocoa beans companies intend to buy. In response, the regulator will provide certified tonnage of cocoa to buyers after presenting their seasonal forecasts.

Ghana's decision to limit cocoa purchases underscores the ongoing challenges in the global cocoa market. While production is expected to increase, the impact of diseases and other factors continues to create uncertainty. Market participants will need to closely monitor these developments as they plan their strategies for the upcoming season.