High fertilizer costs and the Ghanaian cedi’s protracted slide against the US dollar risk undermining the country’s 2022/23 cocoa yields at a time when low global production has helped push the crop’s global estimated stocks-to-grindings ratio to an all-time low, indicating higher prices ahead. Ghana’s upcoming October-to-April crop, the larger of its two crops, represents about 75% of its annual cocoa production.
As Ghana is the world’s second-largest cocoa producer, the gap between what its cocoa growers are paid and global fertilizer prices is also weighing on the global cocoa outlook.
Ghanaian cocoa growers are paid the going producer price for cocoa in cedis. Fertilizer, meanwhile, trades in US dollars globally, and Ghana imports nearly all of the fertilizer that it uses. Even though much of the fertilizer that Ghana’s cocoa growers use is government subsidized, the USDA has reported that the Ghanaian government has struggled to pay its regional fertilizer distributors since 2021.
Since the start of this year, Ghana’s cedi has fallen by more than 50%, and it now trades at $0.07 per dollar. In addition, fertilizer prices, while sharply below their peak reached last spring, are still well more than double their level of two years ago, forcing growers to cut back on fertilizer usage.
Other crops worldwide also risk production shortfalls as fertilizers become less affordable, prompting growers to reduce applications. In July, Gro launched its Global Fertilizer Impact Monitor to help quantify the potential impact on global production of major crops from reduced applications of nitrogen fertilizer under different scenarios. Gro built the Monitor, which is freely available and can be found here, with support from the Bill & Melinda Gates Foundation and in partnership with the International Fertilizer Association and CRU Group.
In Ghana, the recent spate of volatile and inconsistent weather conditions could also discourage the country’s cocoa growers. During the last few years, Ghana’s mid-November through February dry season has become drier. Also, during the last two years, the country has had to contend with more incidences of heavy precipitation, which increase the likelihood of black pod disease — a fungal disease that spreads quickly under heavy rains and high humidity. Black pod disease outbreaks reportedly hit Ghana’s cocoa crop after heavy rainfalls last month. While cocoa needs periods of strong rainfall, dry and sunny spells are also required for optimal growing.
The International Cocoa Organization in October estimated that global cocoa production for the 2021/2022 season, which wrapped up on September 30, would come in about 7% below the previous season. Production at this level would push global cocoa ending stocks down 12% to their lowest level in six years, and it would push the global cocoa deficit to its widest gap since the 2012/2013 season.