Ghana's cocoa industry is on the brink of crisis as local Licensed Buying Companies (LBCs) face potential collapse, threatening the livelihoods of smallholder farmers and destabilising the country's cocoa supply chain, the Ghana Civil Society Cocoa Platform (GCCP) warned.

Reflecting on the challenges of the 2023/2024 cocoa season, the GCCP highlighted the precarious situation of local LBCs, especially those without the financial support of larger entities. 

According to the Business & Financial Times, the group cautioned that without intervention these companies could fail, leading to dire consequences for the key industry.

"We wish to draw the government’s attention to the possibility of collapsing local licensed buying companies which might not have ‘big brothers’ to pre-finance their purchase,” the GCCP said in a statement. 

“The collapse of these local LBCs would greatly destabilise the downstream cocoa supply chain and spell doom for ordinary cocoa farmers who depend on these buyers for their survival,” it added.

The 2023/2024 cocoa season, one of the most challenging in recent history, has seen production levels fall to just above 500,000 metric tonnes — the lowest in over two decades. This sharp decline, reminiscent of the 2002/2003 season, marks a significant drop from Ghana’s peak production years.

The GCCP attributed the drop in production to a combination of low yields, despite high international prices, and a host of economic challenges. These include rampant inflation, rapid currency depreciation, and soaring costs for inputs and labour, which have eroded any potential gains from high global prices, further entrenching poverty among cocoa farmers.

“Extreme weather conditions, including prolonged rainfall in some regions and drought in others, have also contributed to widespread black pod disease, devastating cocoa farms, particularly in the Western-North Region, which produces the majority of Ghana’s cocoa,” the B&FT quoted the group as saying.

The GCCP also pointed to delays in disbursing the cocoa syndicated loan, which left many LBCs, particularly local ones, unable to raise the capital needed to purchase cocoa. This situation led to frustration and disappointment among farmers, who struggled to receive payment for their delivered beans.

"Farmers, in search of money and better prices, smuggled cocoa to neighbouring countries, leading to low volumes of cocoa beans at Ghanaian ports," the statement added. "The government’s attempt to minimize smuggling by reviewing farm-gate prices mid-season was too little, too late."

Despite global cocoa prices reaching a record high of $12,261 per tonne in April 2024, cocoa farmers have seen little benefit from these surges. The GCCP criticised the Ghana Cocoa Board’s (COCOBOD) marketing strategy, which focuses heavily on forward sales rather than spot sales, limiting farmers' ability to capitalise on favourable market conditions.

As the 2024/2025 cocoa season approaches, the GCCP called for a substantial increase in the farm-gate price of cocoa. They estimated that current global market conditions warrant a 65-70% hike, translating to a minimum of $3,671 per tonne or $230 per bag of cocoa beans, based on an exchange rate of US$1:GHS15.65.