Ghana and Cote d’Ivoire have successfully commenced implementation of the floor price mechanism for cocoa, according to a communique issued by the two countries last week.
This has led to the lifting of the suspension placed on the forward sale of the 2020/21 cocoa beans, which was enforced by the two countries on June 11, 2019.
The lifting of the suspension will allow buyers of the beans to resume negotiations on forward sales agreements for the purchase of cocoa from Ghana and Côte d’Ivoire.
The two countries account for about 60 percent of the global supply of cocoa beans.
The floor price mechanism was first introduced to cocoa sector stakeholders in Accra in June and was fully instituted at a follow-up meeting in Abidjan on July 3, 2019.
This requires that buyers of cocoa beans from both countries add a living income differential of US$400 to every tonne of cocoa, which implies that, in addition to the prevailing price of the bean, buyers will have to add US$400 to every tonne bought.
Mr. Aidoo had earlier said that the joint agreement between the two countries requires that both governments must always pay 70 percent of the total amount earned from every tonne of cocoa to crop farmers.
The payment structure is expected to be effective from the 2020/21 season, according to the CEO.
Based on the cocoa pricing initiative of both Ghana and Cote d’Ivoire, a stabilization fund account is expected to established to absorb any value above US$3,000, Cost, Insurance and Freight (CIF) or US$2,900 Gross Free on Board (FOB) of the achieved weighted average. Such monies accruing into the stabilization fund would be used to support farmers whenever the price falls below US$2,200 FOB.
This is expected to be provided for in the Charter, which has almost been completed by both countries, where two accounts are to be set up, one for each country within the collaboration secretariat in Accra. This floor establishes the financial circumstances under which the stabilization fund can be used.
In the 2018/19 crop season, Ghana produced about 950,000 tonnes of cocoa beans, compared to Cote d’Ivoire which produced in excess of 1.5 million tonnes.
In addition to being the biggest producers of the crop, both countries are noted for supplying premium beans, making their produce the most sought after by chocolate companies seeking distinctive flavours for their products.