Effective October 1, this year, Ghana Cocoa Board (COCOBOD) will begin buying cocoa beans from cocoa farmers with the US$400 Living Income Differential (LID) added to their payments.
This was revealed the Managing Director of the Cocoa Marketing Company, Vincent Okyere Akomeah last Wednesday in Accra.
The new premium is meant to support cocoa farmers in both Ghana and Ivory Coast who produce more than 60 percent of the world’s cocoa to tackle pervasive farmer poverty.
To ensure that cocoa famers in the two countries become the sole beneficiaries of the US$400 LID, measures are being initiated to ensure its implementation.
First, COCOBOD and major stakeholders are in the process of preparing a document to be sent to parliament to enable its formal legislation. Besides, the two countries have also signed a charter to put in place a secretariat mandated to monitor the passing on of the entire US$400 LID to cocoa farmers.
Already, the Cocoa Marketing Company has sold hundreds of thousands of tonnes of cocoa beans for the 2020/21 season with prices that include the new US$400 per tonne LID. Recent data released by COCBOD indicate that export of cocoa beans as at end of January 2020 amounted 596,000 tonnes, but these are based on the pre-LID pricing structure.
Cocoa sold under the LID pricing structure, which began in January this year, is based on future delivery during the 2020/21 crop season, which is the market on which Ghana sells most of its production – this made possible by both its premium quality and the reliability of the country’s production developed over time.
Ghana and Ivory Coast joined forces in June last year to impose a floor price for cocoa of $2,600 per tonne and a live income differential (LID) of $400 per tonne. They have also been in talks for two years about simultaneously announcing their respective farmgate prices.
The move is a major overhaul of how cocoa is priced on global commodity markets and buyers initially responded cautiously with only a few deals concluded in the period immediately following the announcement. However, forward market sales have picked sharply in recent weeks encouraging market participants to assume that global demand will meet production under the new, higher cocoa prices.
Speaking during a National Stakeholder Dialogue on cocoa farmgate pricing and income of cocoa farmers organized in Accra by SEND Ghana, the Deputy Chief Executive in charge of Operations at COCOBOD, Dr. Emmanuel Opoku insisted that the LID has come to stay, urging all buyers, processing companies, manufacturers, and brand companies to embrace it.
The dialogue follows a report in Ghana’s cocoa sector compiled by SEND Ghana which captures a number of key challenges affecting cocoa farmers in a bid to propose some recommendations for dealing with such challenges raised which include cheating of farmers using weighing scales.