Ghana’s Cocoa Board reassures traders, investors of meeting targets

“We assure our buyers that there is no cause to panic,” said Noah Amenyah, public affairs manager for Ghana’s cocoa board, known as Cocobod, in an interview with The Wall Street Journal.

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Following last season’s surprise drop in cocoa production in Ghana, the source of as much as a fifth of the world’s beans, the country’s cocoa agency is defending its record as a dependable producer of chocolate’s key ingredient.

After a strong start, Mr. Amenyah says Cocobod is confident Ghana can produce 850,000 metric tons of cocoa for the 2015/2016 season, avoiding the drop seen in 2014/2015 when production fell short of the initial forecast by over 300,000 tons.

Ghana, the world’s second-largest producer of cocoa, after neighboring Ivory Coast, will be desperate to avoid a repeat of the 2014/2015 season. During that season, according to the International Cocoa Organization, the country produced an estimated 696,000 metric tons of the beans, a huge disparity from Cocobod’s initial forecast that production could hit 1 million tons.

The situation was so dire that Ghana’s production came at least 100,000 short of the beans it had already sold to processors and traders, leaving firms on the hook to other buyers down the supply chain.

Those orders have been rolled forward into the current season, leaving some analysts worried that Ghana won't be able to produce enough cocoa to meet demand, just as the weather phenomenon El Niño is expected to hit West Africa. Analysts now expect a deficit for the current season, with Rabobank forecasting a shortfall of 150,000 tons. Concerns over dry weather have also helped to push the London-traded cocoa contract up by more than 10% year-to-date.

“We expect to meet our target. Therefore there is no contingency plan that we will have so far,” Mr. Amenyah said adding that if a shortfall should occur, every effort would be made to collect all the beans available.

While the official declined to give a specific number, he said the board hasn't forward sold the full 850,000 ton forecast, but has only offered enough cocoa to pay back a seasonal loan. The $1.8 billion syndicated loan, from international banks including Standard Chartered, Barclays and Commerzbank, was oversubscribed by 44% and Mr. Amenyah believes this “shows the very huge confidence in the cocoa industry, and so the buyers, the bankers, aren't afraid by what happened last year”.

Two weeks into the 2015/2016 season, which runs from October to September, Mr. Amenyah said warehouses in Ghana were holding roughly 100,000 tons of cocoa beans, almost twice the amount stockpiled at the same period last season. He remained coy about how much cocoa has been shipped from Ghana so far, but a trader believes that deliveries in the first three weeks of October were between 50,000 and 60,000 tons.

“This year we do not hope that we will go through that [shortfall]; we are expecting that this season has started well. The rains have also started quite well for us, we expect that to continue,” Mr. Amenyah said.

“Last year’s season was one that we couldn’t explain, because we were not expecting the production to fall that much,” Mr. Amenyah admits. “The season was quite bad, we had severe harmattan, the rainfall was lighter, and so we lost a lot of crop.” The harmattan is a dry seasonal wind in West Africa.

Cocobod has largely attributed the decline to the falling productivity of old and diseased trees. The board estimates that 40% of the country’s trees are now unproductive, due to either age or disease, but this season, Cocobod will provide 60 million new tree seedlings as replacements.

But according to many analysts and traders in the industry, the cause of last season’s drop is still not conclusive. Market players have attributed the drop to factors including the late application of fertilizers, a structural shift of labor to cities and illegal gold mines, and smuggling into Ivory Coast, after the devaluation of the Ghanaian currency undermined the minimum price set by Cocobod.

Nonetheless, Ghana addressed the drop “to the best of our abilities”, Mr. Amenyah said. “I think the difference [in the crop] wasn’t big [enough] to turn into a shock. There’s so much confidence in the Ghana cocoa industry.”

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