Ghana farmers sweet on cocoa minimum price drive

Last week, Ivory Coast and Ghana decided to rise the global price of cocoa. (AFP)
Updated 01 July 2019
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Ghana farmers sweet on cocoa minimum price drive

  • Ivory Coast and Ghana had earlier threatened to stop selling their products to buyers unwilling to meet a minimum price of $2,600 per ton
  • The two African nations together account for 60 percent of the world’s cocoa production

ACCRA: Kwame Boadu was forced to abandon his cocoa plantation to work in Ghana’s capital Accra, but when the government announced plans for a price floor he began dreaming of a return to his fields.

A higher guaranteed price for the crop means a cocoa farmer “can afford fertilizer, he can afford weedkiller, he can employ more laborers, so he can increase his production,” he said.

And moreover, it would guarantee that farmers get more money when they increase output, the 34-year-old added.

Earlier this month, key producers Ivory Coast and Ghana threatened to stop selling their products to buyers unwilling to meet a minimum price of $2,600 per ton.

The two African nations — which together account for 60 percent of the world’s cocoa production — want to end a situation where cocoa producers make only $6 billion in a global chocolate market worth around $100 billion.

The move sent world cocoa prices briefly above $2,500 per ton, but they have since fallen back below that level.

IN NUMBER

The likely price of a ton of cocoa following Ghana and Ivory Coast’s decision to introduce a price floor.

After spending much of 2015 above $3,000 per ton, world cocoa prices slumped, fluctuating around $2,000 in 2017. The price drop squeezed farmers, who welcome government intervention.

“We don’t have anything to sell apart from cocoa,” said Alhaji Alhassan Bukari, who heads up Ghana’s farmers’ union.

“So if the government has thought about the farmers, they come together to fight for the farmers, we support them,” he said.

Cocoa is a key sector of the national economy, according to the Ghana Cocoa Board, both in terms of providing employment to around 800,000 families and generating revenue for the government’s coffers.

Ghana’s Vice President Mahamudu Bawumia said earlier this month at a meeting with farmers and buyers that Ghana and Ivory Coast made their proposal to ensure farmers get “a fair share of the wealth that the industry generates.”

Establishing a price floor would also help revive rural communities.

“A satisfactory price of cocoa beans will go a long way to complement the government's investments in rural infrastructure and improve the wellbeing of the communities,” said Bawumia.

But farmers are not the only ones concerned by the discussion over cocoa prices.

While chocolate has long been a marginal product in Ghana, despite the country being a major producer of its primary ingredient, in recent years a new batch of chocolate makers has set up shop.

Selassie Atadika, the chocolatier at Midunu, a maker of handcrafted chocolates, says she has noticed more local chocolate on the shelves in Ghana’s shops.

“I think in general there is more awareness, people are using it at more events and things like that so there is probably an increase in people’s interest in buying chocolate.”

These local producers have an interest in cocoa prices, and fear a jump in prices could hurt their businesses.

Atadika said she hopes a price floor would help cocoa farmers.

But for those trying to develop chocolate as a product “issues remain, even if the price of cocoa beans does not change, the price of sugar, milk powder and electricity will still be a major influence in their capability to make the chocolate,” she said.

Local producers buy beans from the second, smaller harvest. Moreover, they enjoy a subsidy on the purchase of beans from this harvest, according to the Ghana Cocoa Board.

“What would make an impact on domestic chocolate makers is if there was a loosening of regulations regarding who can sell and buy main crop beans, which would open opportunities for new domestic sourcing routes for cocoa,” said Kristy Leissle, a cocoa industry expert and lecturer at the University of Washington Bothell.

A development which would benefit all is if more cocoa was processed in Ghana, capturing more of the value added in the industry.

“We need to add value in Ghana, so we can send the world’s best products from here,” said chocolatier Atadika.


Debut of China’s Nasdaq-style board adds $44bn in market cap

Updated 55 min 28 sec ago
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Debut of China’s Nasdaq-style board adds $44bn in market cap

  • Activity draws attention away from main board

BEIJING: Trading on China’s new Nasdaq-style board for homegrown tech firms hit fever pitch on Monday, with shares up as much as 520 percent in a wild debut that more than doubled the exchange’s combined market capitalization and beat veteran investors’ expectations.

Sixteen of the first batch of 25 companies — ranging from chip-makers to health care firms — increased their already frothy initial public offering (IPO) prices by 136 percent on the STAR Market, operated by the Shanghai Stock Exchange.

The raucous first day of trade tripped the exchange’s circuit breakers that are designed to calm frenzied activity. The weakest performer leapt 84.22 percent. In total, the day saw the creation of around 305 billion yuan ($44.3 billion) in new market capitalization on top of an initial market cap of around 225 billion yuan, according to Reuters’ calculations.

“The price gains are crazier than we expected,” said Stephen Huang, vice president of Shanghai See Truth Investment Management. “These are good companies, but valuations are too high. Buying them now makes no sense.”

Modelled after Nasdaq, and complete with a US-style IPO system, STAR may be China’s boldest attempt at capital market reforms yet. It is also seen driven by Beijing’s ambition to become technologically self-reliant as a prolonged trade war with Washington catches Chinese tech firms in the crossfire.

Trading in Anji Microelectronics Technology (Shanghai) Co. Ltd., a semiconductor firm, was briefly halted twice as the company’s shares hit two circuit breakers — first after rising 30 percent, then after climbing 60 percent from the market open.

HIGHLIGHTS

• 16 of 25 STAR Market firms more than double from IPO price.

• Weakest performer gains 84 percent, average gain of 140 percent.

• STAR may be China’s boldest attempt at capital market reforms yet.

The mechanisms did little to keep Anji shares in check as they soared as much as 520 percent from their IPO price in the morning session. Anji shares ended the day up 400.2 percent from their IPO price, the day’s biggest gain, giving the company a valuation of nearly 242 times 2018 earnings.

Suzhou Harmontronics Automation Technology Co. Ltd., in contrast, triggered its circuit breaker in the opposite direction, falling 30 percent from the market open in early trade before rebounding. But by the market close, the company’s shares were still 94.61 percent higher than their IPO price.

Wild share price swings, partly the result of loose trading rules, had been widely expected. IPOs had been oversubscribed by an average of about 1,700 times among retail investors.

The STAR Market sets no limits on share prices during the first five days of a company’s trading. That compares with a cap of 44 percent on debut on other boards in China.

In subsequent trading sessions, stocks on the new tech board will be allowed to rise or fall a maximum 20 percent in a day, double the 10 percent daily limit on other boards.

Regulators last week cautioned individual investors against “blindly” buying STAR Market stocks, but said big fluctuations were normal.

Looser trading rules were aimed at “giving market players adequate freedom in the game, accelerating the formation of equilibrium prices, and boosting price-setting efficiency,” the Shanghai Stock Exchange (SSE) said in a statement on Friday.

The SSE added that it was normal to see big swings in newly listed tech shares, as such companies typically have uncertain prospects, and are difficult to evaluate.