International buyers have committed more than $500 million in upfront payments to Ghana’s state-run marketing board, Cocobod, as part of a strategy to secure cocoa supplies and avert another year of severe losses. The unprecedented move comes after a significant restructuring of the cocoa marketing system in Ghana, the world’s second-largest producer of the commodity.
Historically, Cocobod relied on bank loans to finance cocoa purchases from farmers and then sold forward contracts to international buyers. However, faced with declining production and a series of financial setbacks, Cocobod has been unable to secure traditional syndicated loans for this season’s crop, marking the first time in over three decades. As a result, private companies have taken on a more prominent role, financing the procurement process directly.
Cocobod claims the new approach—requiring buyers to pay upfront for cocoa—will reduce costs. However, industry experts and traders have expressed concerns about the risks posed by this shift, which has placed much of the financial burden on private players in the sector.
“The entire system has become reliant on private traders to manage everything, which is a significant risk for the future of Ghana’s cocoa industry,” said one small-scale trader. While the industry remains engaged for now, there are growing fears that continued losses could drive buyers to other sources of cocoa, especially as cocoa prices remain volatile.
The shift comes at a time when Ghana, along with its neighbor Ivory Coast, is facing supply challenges due to poor harvests, sending global cocoa prices to record highs. Despite the price surge, Cocobod has struggled to meet its contractual obligations, having oversold the previous crop. As a result, cocoa futures have spiked again, further raising concerns about higher costs for chocolate producers and consumers worldwide.
Traders are also grappling with the reality of unfulfilled contracts from the previous season. With an estimated $1 billion in losses from failed futures contracts, Cocobod has required traders to purchase additional cocoa at current market prices to make up for the shortfall. This strategy is designed to stabilize the market, but it has left traders with little choice but to continue buying at inflated prices to reduce their exposure to further losses.
In the past, Cocobod’s role was to manage the entire cocoa supply chain, securing loans to finance licensed buying companies (LBCs) that would purchase beans from farmers. But with the decision to forgo bank financing and rely on upfront payments from buyers, the financial landscape for the sector has shifted dramatically. Smaller traders, in particular, are now exposed to greater risk, and concerns are mounting over the sustainability of the new system.
“The financial risks are enormous at the moment,” said one cocoa fund manager. With the upcoming national elections adding a layer of political uncertainty to the situation, many are questioning whether Ghana’s cocoa industry can navigate these challenges successfully.
Industry experts warn that the country’s cocoa production must exceed expectations to meet both last season’s unfulfilled contracts and the current demand. Analysts suggest that a production of around 900,000 tons will be necessary—250,000 tons more than Cocobod’s own optimistic projections.
“If the supply falls short, traders and local processors may struggle to get the beans they need, which could lead to further disruptions in the market,” said Tedd George, an expert in African commodities.
As the season progresses, it remains unclear whether Ghana will be able to bridge the supply gap, and some traders are already looking elsewhere for more stable sourcing options. Despite the challenges, Cocobod maintains that its new model is working, with farmers reportedly receiving payments on time. However, the broader cocoa industry remains cautious about the long-term sustainability of this shift.
