COCOBOD's contract rollover costs nation $1.3 billion

The Ghana Cocoa Board (COCOBOD) faces staggering losses of $1.3 billion after being forced to roll over forward contracts from the previous season. 

In the 2023/2024 crop season, COCOBOD failed to deliver 333,767 tonnes of cocoa sold at $2,600 per tonne.

The board is therefore now fulfilling these contracts in the 2024/2025 season at a massive discount while global cocoa prices have soared to around $6,600 per tonne. 

For every tonne delivered under these rolled-over agreements, Ghana loses approximately $4,000 in potential revenue.

The crisis has already resulted in $840 million in lost income after delivering 210,000 tonnes of the outstanding contracts, with another $495 million in losses expected once the remaining obligations are fulfilled, President John Mahama disclosed at his maiden State of the Nation Address.

These financial haemorrhages come at a time when Ghana's economy is already struggling under a public debt burden of GH¢721 billion.

COCOBOD itself is drowning in debt, with its balance sheet showing total liabilities of GH₵32.5 billion. 

Particularly concerning is the GH¢9.7 billion coming due at the end of September 2025, raising questions about the board's ability to meet these obligations while experiencing such significant revenue shortfalls.

President Mahama said this debt had arisen mainly because of the decision in 2019 and 2020 to award road contracts worth over US$1 billion because of the election.

The President said that cocoa road commitments—a programme intended to develop infrastructure in cocoa-growing regions—amounted to GH¢21.7 billion, with only GH¢4.4 billion accounted for in COCOBOD's official debt figures. 

This discrepancy suggests the board's financial situation may be even more precarious than previously acknowledged.

The cocoa sector's troubles compound Ghana's broader economic challenges, as cocoa remains one of the country's primary export commodities and foreign exchange earners. 

The revenue losses will likely impact Ghana's currency stability and import capacity at a time when the country is working to stabilise its economy.

Forward contracts 

President Mahama’s disclosure comes at a time critics have questioned COCOBOD's forward-selling strategy and risk management practices. 

While forward contracts typically provide price stability, the extreme market volatility in cocoa prices has exposed weaknesses in the board's hedging strategies and contingency planning for production shortfalls.

At the beginning of the 2024/2025 season, the then sector minister, Bryan Acheampong, said the board would prioritise spot sales over forward contracts for the new cocoa season. 

This strategic shift was to take advantage of potential price surges in the international cocoa market, following a missed opportunity last season when prices soared to $12,000 per tonne. 

With a change in administration, it remains unknown which direction would be prioritised.

Sector challenges 

This development comes at a time when Ghana's cocoa industry faces mounting pressure, including smuggling of the beans to neighbouring countries, despite declining local production.

As the world's second-largest cocoa producer after Côte d'Ivoire, Ghana faces significant challenges in its cocoa sector that demand immediate attention from the new leadership at COCOBOD. 

The sector has experienced a dramatic decline in production, falling from a record high of 1.033 million tonnes in 2020/2021 to 550,000 tonnes in 2023/2024. However, COCOBOD aims to reach 650,000 tonnes in the current season. 

This decline stems from multiple factors, including climate change impacts, widespread tree diseases, and disruption from illegal mining activities.

The International Monetary Fund has identified COCOBOD's recurring annual losses as a significant threat to the sector and Ghana's broader fiscal stability.