GHANA – The Ghana Cocoa Board (COCOBOD) has refuted allegations made by the Minority in Parliament that the Chief Executive Officer (CEO) oversold cocoa forward sales.
Forward sales play a crucial role in securing syndicates and strategically managing cocoa stocks.
In response to the accusations, COCOBOD issued a statement clarifying that the allocation of 338,600 metric tons of cocoa as collateral for the syndicated loan did not adhere to the requirement that the remaining quantity be sold exclusively at spot prices.
The statement emphasized that during the determination of the producer price for the 2023–24 season, a significant portion of cocoa had been sold for valid reasons, affirming the accuracy of the CEO’s remarks and dismissing any accusations of falsehood.
Furthermore, the statement highlighted COCOBOD’s diversified approach to cocoa sales, utilizing forward, spot, and prepayment options based on market dynamics, funding availability, and collateral requirements.
It underscored that employing forward sales is a strategic technique aimed at mitigating price risks and efficiently managing stock.
The statement provided assurance to all stakeholders, stating that if the final average price exceeds the US$2600 considered by the Produce Price Review Committee (PPRC) in determining the current cocoa producer price, due consideration would be given in favour of the workforce.
It concluded by reiterating the board’s commitment to fostering a transparent and equitable cocoa production and trading environment.
Despite these assurances, it is noteworthy that the Cocoa Board traditionally relies on an annual syndicated loan to fund bean purchases from farmers.
This year, the process faced delays attributed to mobilization difficulties, including the country’s financial situation.
The COCOBOD aims to finalize a syndicated loan of US$800 million by the end of the month, covering 47% of anticipated purchases for the 2023–2024 campaign (850,000 tonnes).
Various banks, including Rabobank, Société Générale, Natixis, Standard Chartered, and the Industrial and Commercial Bank of China, are involved in granting the loan.
However, the terms of the loan are characterized by an 8% interest rate, compared to the usual 2%, which presents challenges for the country.
This interest rate marks the highest in a decade, posing a notable contrast to the typical September conclusion of the loan.
Ray Ankrah, deputy general manager of COCOBOD, explained to Reuters that the elevated interest rate is a consequence of the one-month Secured Overnight Financing Rate (SOFR), reflecting tightening global funding sources.
He emphasized that the guaranteed facility carries zero risk, justifying the higher rate.
In light of the prevailing high world cocoa prices, COCOBOD intends to capitalize on the increased cocoa contract prices to sell a portion of the harvest for cash, facilitating loan repayment.
Cocoa prices have been steadily rising, reaching a record level of 3,478 pounds per tonne in London on November 10, the highest in 45 years.
COCOBOD had previously secured an arrangement to mobilize US$400 million from international bean traders such as Olam and Barry Callebaut for cocoa purchases in the 2023/2024 season, according to Bloomberg.
