GHANA – The Ghana Cocoa Board, the industry regulator in the country, has approached major cocoa bean traders for a $500 million loan support to its industry operations, as delays in finalizing its annual syndicated loan from regular lenders persist due to uncertainties over crop yields.
The Ghana Cocoa Board seeks to raise at least one-third of the US$1.5 billion, according to sources familiar with the situation, Bloomberg reported.
The funds will act as a temporary solution while Ghana continues discussions with banks ahead of the new season starting in October, according to sources close to the matter.
This is the second consecutive season that Ghana, the world’s second-largest cocoa producer, has sought funding from cocoa dealers instead of securing its annual syndicated loan on time.
Typically, Cocobod secures the syndicated loan in September, right before the season kicks off. However, last year’s debt restructuring complicated negotiations, pushing the loan approval to December.
This delay forced Ghana to borrow US$400 million from cocoa traders in November and an additional US$200 million in March after lenders withheld the final US$800 million tranche.
The board relies on this facility to cover costs for seedlings, chemicals, fertilizers, and bean purchases from farmers, while the foreign exchange supports the central bank in stabilizing the national currency.
Unfortunately, the banks has had hesitation which are stemmed from concerns about Ghana’s cocoa revenues due to a drop in output, which has contributed to a global cocoa shortage for the third consecutive year.
Unfavorable weather, disease, and a shortage of fertilizers have hurt bean harvests in Ghana. The country’s production fell from 683,000 tons in 2021-22 to 654,000 tons in 2022-23, with a projected decline to 501,000 tons by September’s end, according to International Cocoa Organization data.
Additionally, Ghana has around 250,000 tons in forward sales contracts yet to be fulfilled, some of which have been deferred from the past three years.
Lasting issues facing the cocoa industry in West Africa range from crop disease to climate change. It takes at least three years for a cocoa tree to reach fruit-bearing maturity, constraining how quickly production can ramp up.
Analysts at Fitch Solutions’ BMI unit forecast rolling second-month cocoa futures in New York to average US$7,000 a ton in 2024.
Although that’s down from eyewatering levels above US$11,000 earlier this year, most-active futures had averaged less than US$2,000 for decades and the December contract is currently trading above US$7,000.
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