Cocoa Fails to Glitter in 2001- 2002

Cocoa, Ghana's most important traditional export crop and for centuries the backbone of the economy has contributed negatively to agricultural Gross Domestic Product (GDP) in the last two years, mainly due to declining supplies to Ghana Cocoa Board rather than declining world market prices, according to the State of the Ghanaian Economy Report released last week.

The report compiled by the Institute of Statistical, Social and Economic Research (ISSER) said output of cocoa declined from 389,800 metric tonnes in the 2000/2001 season to 340,600 metric tonnes in the 2001/2002 season, recording a decline of 12.6 percent in 2002 against output the previous year. The steady decline in the cocoa output in the last two seasons has been attributed partly to smuggling across the borders to neighbouring countries.

Compared with production two seasons earlier, output in 2001/02 showed a cumulative decline of 22 percent, according to the report. The drop in production probably explains why Ghana lost her second spot of the league of cocoa producers to Indonesia, after production slumped in 2001.

The report said the decline indicates that output has not responded positively inspite of a 93.89 percent increase in the producer price in 2002 alone and the massive spraying of cocoa farms to eradicate capsid pests and black pod diseases.

The report had hoped that substantial producer price increases and mass spraying should have generated positive supply response. But that has not been the case. "For now, however, the continuous decline in cocoa production is officially attributed to the smuggling of cocoa to Cote d'Ivoire despite the anti-smuggling measures put in place by the government", the report emphasized.

This raises the question of whether or not increasing the producer price alone is enough to motivate farmers and countering smuggling. The report narrows the debate to the unstable external price of cocoa and the rapid depreciation of the national currency (cedi).

For instance at the beginning of 2002 the external price of cocoa increased by 64.0 percent from US$1,261.05 per tonne to US$2,068 per tonne at the end of the year. Using the average cedi-dollar exchange rate of ?7,266,56 and ?8,315.36 for January and December respectively, the external price of cocoa worked out to ?9,167,278 per tonne in January and ?17, 196,164 per tonne in December 2002. Ignoring the periodic bonuses paid to cocoa farmers, the prevailing domestic producer price of ?8, 500,000 per tonne of cocoa in the last quarter of 2002 was 49.43 percent of the world price by December 2002. "This might explain the continued smuggling of cocoa to neighbouring countries", says the report.

During his presentation Professor Ernest Aryeetey, Director of ISSER explained that cocoa production declined to 12 percent last year due to the fact that the Western Region, whose soil is un losing its fertility has become the leading producer of the cocoa in the country.

"Cocoa cannot take us into the future. It can help us survive today, but its future is bleak", says Aryeetey, who called for debate on the future of the crop. According to Professor Aryeetey it is time Ghanaians found something to complement cocoa.

The bleak future of cocoa notwithstanding, the agricultural sector made a significant contribution to the economy in 2002. At constant 1993 prices, the sector's contribution to GDP remained the highest among other sectors of the economy.

According to the report, the agricultural sector's contribution to foreign exchange earnings was $732 million in 2002, an increase of 15.8 percent over its contribution in 2001. This level of performance in 2002 was 5.0 percent higher than the average in the second half of the 1990s.

The report attributes the increase in agriculture's contribution to GDP to higher revenue in all the major sub sectors, namely cocoa, timber and the non-traditional exports. Interestingly, foreign exchange from the cocoa sub sector recorded the highest (21.5%) in 2002 compared with 2001.

On the outlook for agriculture the report said no new agricultural reform or policy has been indicated for 2003. It points that the activities planned for 2003 are centred on farm mechanization and development of processing machines, increasing the production of selected crops, fish farms, poultry and agro-processing.

To make headway in cocoa production the report suggests that authorities should get the producer price right as an incentive, enhance pest and disease control through mass spraying and promoting the adoption of improved farming practices.