By the end of this week, a number of licenced buying companies (LBCs) or cocoa buyers in Ghana may suspend cocoa purchasing activities upcountry, Cocoa Post has gathered.
LBCs are companies authorised to buy cocoa beans directly from farmers for onward delivery to Ghana Cocoa Board for a commission.
Multiple sources within Ghana’s cocoa sector say LBCs face a financial crunch occasioned by “Ghana Cocoa Board’s failure to honour Cocoa Taken Over Receipts (CTORs),” which are invoices for cocoa delivered at Cocobod sheds.
“I can tell you that by the end of this week, most LBCs will stop field funding,” an LBC executive revealed on condition of anonymity, adding that “by the end of January,” there could be a complete halt.
The development could be cause for concern considering that field funding and cocoa-buying activities would usually end around May or June.
The source emphasised that “it is a difficult situation” also because the regulator will begin recoveries for seed funds by March, a period too short to have done any meaningful business.
The source added that purchasing clerks are being instructed to cease all cocoa-buying activities at the society level as funds are unavailable to continue paying farmers.
“We just want to minimise our exposure to the bank overdrafts for now,” the executive said, adding that “a further push can compromise the health of the business.”
Commercial bank lending rates in the West African country average 32%, with the local economy currently on a $3-billion IMF programme until 2026.
The companies deem it quite “risky to contract additional overdrafts” beyond what is sitting on their books, especially without any assurance that they would be paid in the next month or two, the sources underscored.
According to them, discussions remain inconclusive about having COCOBOD agree to absorb extra interest incurred for loan facilities past due stemming from Cocobod’s non-payment.
A management member of an LBC who preferred not to be named said, “After a prolonged wait for the seed fund to be paid, some of us received less than 20% of what we requested,” and quizzed, “How can we deliver anything with this meagre amount?”
Another source earlier told Cocoa Post that cocoa consignments already delivered to COCOBOD prior to the receipt of the syndicated loan cash remain unpaid.
Ghana has already paid dearly for the delay in mobilising the annual cocoa syndicated loan.
Black market traders cached in Some unscrupulous people are said to have smuggled significant volumes of cocoa to some neighbouring countries on the promise of higher prices for the commodity.
Industry watchers have described the country’s seeming cashflow hiccups as strange considering that just last month COCOBOD received $800 million in a syndicated loan for the purchase of the country’s 2023/24 crop.
The chairman of Cocoa Abrabopa Farmers Cooperative, Ishmael Pomasi, said the LBCs’ withdrawal from cocoa-buying activities is going to impact heavily on farmers’ livelihoods.
Pomasi added, “It means a widening of poverty levels among cocoa farmers who, through no fault of ours, can’t sell our produce,” because there are no buyers.
He was emphatic that the funding crisis could aggravate cross-border smuggling activities in border communities, eventually affecting the projected production target for the year.
The International Cocoa Organisation (ICCO) estimated a global cocoa supply deficit of 100,000 metric tonnes for the 2022/23 season.
The new year opened with cocoa prices continuing to rally on international commodity exchanges on account of supply shortfalls and unfavourable weather.
Industry experts believe the situation in Ghana could further deepen supply disruption woes in the global industry.
