Ghana To Borrow US$1.5B To Finance 2024/2025 Cocoa Purchases

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The Ghana Cocoa Board (COCOBOD) will borrow up to US$1.5 billion before the start of the new season in September to compensate for low cocoa output and finance cocoa purchases for the 2024/2025 season, reports inside sources.

COCOBOD uses a syndicated loan system to buy cocoa beans from farmers. The terms of the loan are usually agreed upon with lenders before the start of the season.

However, this season’s loan totaling US$800 million has faced delays because of low cocoa output in Ghana. The season’s output is expected to be 40% below forecast.

Unable to guarantee the full loan amount, COCOBOD withdrew US$600 million and canceled the remaining amount.

An inside source told Reuters, “A request for proposal sent to banks indicates Cocobod will borrow up to US$1.5 billion next season. It is understood the banks are sizing it and together (with Cocobod), they will decide an optimal amount.”

However, the source revealed that only one international bank has visited the cocoa-producing country to inspect farms and decide on a loan offer. Another bank is expected to visit cocoa farms in Ghana in early June.

A second source has expressed confidence that the loan agreement will be finalized before September.

The sources also revealed that COCOBOD targets recovery of 810,000 tons in the 2024/2025 season.

The Ghanaian cocoa industry has been plagued by poor yields, caused primarily by disease and adverse weather. These yields have driven cocoa prices upwards to record highs and incentivized smuggling among cocoa brokers.

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The swollen shoot virus wiped out up to 50% of potential cocoa harvests in the 2023/2024 season.

COCOBOD also revealed it lost more than 150,000 tons of cocoa beans to smuggling rings in the same season.

All of these factors led to the perfect storm, a significant surge in prices as chocolate companies scrambled for the scarce supply of beans, often circumnavigating prices and terms of engagement set by the board. Some chocolate companies opted to pay premium prices for beans just to meet supply requirements.

International cocoa prices reached a record high of US$10,000/ton in mid-April. Although recent rains helped induce a slight price reduction, shortages have kept prices volatile.