Nana Addo cannot claim glory for increase in cocoa prices
The government’s claim to have increased cocoa prices by about 28% to Ghs10,560 per metric ton (myjoyonline-24/09/2020) is yet another lame attempt to throw dust into the eyes of Ghanaians, especially our dear cocoa farmers.
The only real increment in cocoa prices by this government was in 2019 by Ghs40 per bag to Ghs8,240 per metric ton after inheriting Ghs7,600 per metric ton from the NDC government.
In this article I will demonstrate that the said increment of 28% in cocoa prices is equivalent to the mandatory compensation to farmers (referred to as the Living income Differential-LID) by the world buyers of cocoa.
Ghana and Côte d’Ivoire account for 65% of the world’s cocoa production (source:the Africareport). It is only fair that both countries should have a bigger say in the price settingand the well being of their respective farmers.
Since 2013, right from the time of Dr Opuni as CEO, the governments of both countries have always fought for a price floor (minium below which prices must not fall) for cocoa, as part of measures to alleviate poverty among farmers in the two countries. This has now materialised in the form of the LID (instead of a price floor), to be effective in the 2020/21 cocoa season.
The LID is an additional income per tonne to be paid by all partners buying cocoa on fair trade terms. This amount currently set at $400 per tonne (16 cocoa bags), is a commitment by cocoa buyers as a means to improving the livelihood of cocoa farmers in Ghana and Côte d’Ivoire. In fact, both governments are required to pass this on to the benefit of famers in the form of increased prices.
You can consider the LID as a compensation to farmers by all the world market coco bean buyers like Touton, Barry Callebaut, Cargill, Olam, Ecom Trading etc.
This does not form part of the world prices of cocoa (which is currently £1,890-London Stock Exchange 25/09/2020).
Table 1 shows a 4 yr comparison of cocoa prices under Mahama and Nana Addo.
Table 1
Cocoa prices per bag in Ghs
|
|
Over 4 years Mahama price per bagin Ghs |
|
|
Over 4 years Nana Addo price per bag in Ghs |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mahama start 2012 |
212.00 |
|
Nana start2016 |
475.00 |
|
Mahama end 2016 |
475.00 |
|
price. effective Oct |
660.00 |
|
Increase by |
263.00 |
|
Increase by |
185.00 |
|
|
|
|
|
|
|
Increase by |
124% |
|
Increase by |
39% |
Similar to infrastructural development, Mahama’s overall increment in cocoa prices over his 4-year tenure DWARFS that of Nana over the same period.
How did Government arrive at the increment of 28% to Ghs660.00
Price per bag up to Sep 2020 = Ghs515.00
Price per bag from Oct 2020 = Ghs660.00
Increase by Ghs145 or 28% approximately
However, Table 2 proves that the increment of Ghs145 is equivalent to the LID
Table 2
|
|
|
Ghs |
|
Current price per bag before increase |
|
515 |
|
New price eff. Oct 2020 |
|
660 |
|
|
|
|
|
Difference |
|
145 |
|
Difference % |
|
28% |
|
|
|
|
|
LID Per bag in Cedis: Exc rate 5.80 |
$400 |
145 |
Clearly you can see that the increment is exactly the same as the Living Income Differential which government is obligated to pass on to farmers. Government has actually not increased cocoa prices, it merely passed on monies belonging to cocoa farmers.
If we consider that government has been selling fertilisers to farmers at Ghs80 per bag, we can conclude that government retains as much as 43% of the FOB price (price before Gov deductions) per bag.
The below takes the price per tonne (16 bags) in the London stock exchange and incorporates the LID to arrive at the FOB. We then divide this by 16 to arrive at the price per bag, and then subtract the price of Ghs660 to arrive at government deductions
Table 3
|
Exchange rates |
|
|
|
|
1 USD = |
Ghs 5.80 |
|
|
|
1 USD = |
GBP 0.78488 |
|
|
|
|
|
|
|
|
Cocoa Current prices 25/09/2020 |
USD |
Ghs |
GBP |
|
16 bags (tonne) |
2,408.00 |
|
£1,890 |
|
|
|
|
|
|
|
|
|
|
|
In Cedis per tonne (5.8*$2,408) |
|
13,966.40 |
|
|
LID Per tonne @exchange rate 5.80*$400 |
400 |
2,320.00 |
|
|
total per tonne in cedis |
|
16,286.40 |
|
|
|
|
|
|
|
Per bag: Be4 Gov Deductions (FOB) |
16,286.40/16 |
1,017.90 |
|
|
|
|
|
|
|
Price per bag effective Oct to farmers |
|
660.00 |
|
|
Diff=Gov Deductions (1,017.90 – 660) |
|
357.90 |
|
|
|
|
|
|
|
Add fertilisers |
|
80.00 |
Gov selling fertilisers |
|
total gov deductions |
|
437.90 |
|
|
total gov deductions in % |
|
43% |
|
Despite retaining this much we cannot see what this government has done for farmers. How many cocoa roads have been constructed? What is the justification to sell fertilisers to cocoa farmers after retaining funds meant for thispurpose from cocoa proceeds? Our farmers must be angry at this government. And for a good reason. It is pure robbery.
Without LID the NDC gov increased cocoa prices by about 124% over 4 years. Nana Addo only did a paltry 39% over the same period even with the inclusion of LID. Without LID the NPP only increased cocoa prices by Ghs40 in 2019 representing 8.4% ((515/475-1) *100), from the prices they inherited.
To claim glory for merely passing on the Living Income Differential to farmers is dishonest and opportunistic. Nana Addo, come clean and let the farmers know that you were merely sent to deliver the $400 to them.
–
By: Sam Zangi.
Sam is a chartered accountant and a member of the NDC Telford Branch in the UK.
