Cocoa Industry Braces for Price Increase

The cocoa industry in Ghana is on the cusp of significant changes, driven by both external market factors and evolving regulatory pressures. As 2025 approaches, the local industry is bracing for higher prices, with forecasts predicting a continued surge in cocoa prices due to tight global supply and increased demand. Initial projections at the end of 2024 indicated that cocoa prices could rise to $9,600 per metric tonne (pmt) by 2025, but these expectations were surpassed when prices reached $11,925 by December 2024. By early January 2025, March ICE NY cocoa futures closed at $10,984.81 per metric tonne, reflecting a slight 1.68% decrease from the previous day.

In December 2024, global cocoa prices hit $10.32 per kilogram, marking an impressive 30.73% rise from November 2024 and an extraordinary 145.2% increase compared to the same month in 2023. These price hikes have been driven by a combination of factors, such as unfavorable weather conditions like El Niño, which has severely impacted cocoa yields in key producing countries such as Ghana and Côte d’Ivoire. Additionally, illegal activities like gold mining have worsened the situation by reducing available farmland for cocoa cultivation, contributing to the global cocoa supply shortage.

The price surge in 2024 has been dramatic, with cocoa prices nearly doubling by mid-November, from an initial price of $4,916 to $8,523 per metric tonne. This 73.4% increase was largely a result of the supply shortfall from Ghana and Côte d’Ivoire, worsened by El Niño’s effects on crops and the rising global demand for chocolate. According to projections from Databank for 2025, the European Union Deforestation Regulation (EUDR), which comes into effect in early 2025, will further limit the availability of cocoa on the market. The EUDR’s stringent requirements on traceability and deforestation-free standards will likely keep cocoa prices high as the demand for sustainable products continues to grow.

However, while the global market is benefiting from these price increases, the local cocoa industry faces significant hurdles. One of the key challenges is the financial instability faced by the Ghana Cocoa Board (COCOBOD), which has struggled to secure its usual syndicated loans. This financial difficulty has hindered local cocoa farmers from benefiting fully from the surge in cocoa prices. In September 2024, COCOBOD raised the price of cocoa for the 2024-2025 season to GH¢48,000 per tonne, which translated to approximately GH¢3,000 per 64-kilogram bag of cocoa. While this represented a 129.36% increase from the previous season, civil society groups argued that the price was still insufficient for the farmers.

Compounding the situation is the European Union’s new Deforestation Regulation (EUDR), which introduces stringent traceability requirements for cocoa producers. Under the EUDR, cocoa entering the EU market must be traceable to ensure it is sourced from deforestation-free areas. For Ghana’s cocoa industry, compliance with these regulations presents a significant challenge. An analysis by the Tropical Forest Alliance (TFA) found that while 80% of cocoa exports from Ghana could be linked to a company disclosing supply chain information, only 9% of the exports could be traced back to the district of origin, a key requirement for compliance.

The situation is further complicated by Ghana’s land ownership and tree tenure systems. Under the Concessions Act, trees naturally occurring on private land are vested in the state, which discourages farmers from preserving these trees. In response to this challenge, the government has introduced a Tree Tenure and Benefit Sharing mechanism to ensure that farmers and communities benefit from the trees growing on their farms. However, the implementation of this system is expected to take time.

Smallholder farmers, who make up the majority of cocoa producers in Ghana, are facing the greatest difficulty in meeting the new regulatory requirements. With over 800,000 farmers depending on cocoa for their livelihoods, many of them are unaware of the EUDR requirements or the technicalities of traceability. Misconceptions persist, such as the belief that ‘sun cocoa’ is superior to ‘shade cocoa’, despite evidence showing that shaded environments are more conducive to optimal cocoa yields.

To address these issues, organizations like Proforest, in partnership with COCOBOD, are offering training programs to help farmers adopt sustainable cocoa farming practices. The Ghanaian government has also introduced a National Cocoa Management System (NCMS), which includes a Cocoa Traceability System to track cocoa farms and ensure compliance with deforestation-free standards. However, implementing these systems is resource-intensive, and the financial constraints are a significant obstacle to their successful rollout.

Despite these challenges, the cocoa industry remains a crucial part of Ghana’s economy, providing jobs for over 3.2 million people. With global demand for chocolate continuing to rise, the future of the cocoa industry in Ghana depends on successfully navigating regulatory changes, improving financial stability, and ensuring sustainable farming practices that can meet both local and international standards.