COCOBOD to Borrow Up to $1.5 Billion for 2024-25 Cocoa Purchases – Sources

Ghana’s cocoa regulator, COCOBOD, plans to borrow up to $1.5 billion by September 2024, to finance cocoa purchases for the 2024/25 season and address the impact of low output, according to two sources familiar with the arrangement.

As the world’s second-largest cocoa producer, Ghana relies on an annual syndicated loan to buy cocoa beans from farmers, usually secured at the start of the season in September. However, this year’s $800 million loan faced delays due to lower-than-expected cocoa output.

COCOBOD has withdrawn $600 million of the loan and canceled the remainder, as the season’s cocoa output is projected to be nearly 40% below the forecast, making it difficult to guarantee the full loan amount.

“A request for proposal sent to banks indicates COCOBOD will borrow up to $1.5 billion next season. It is understood the banks are sizing it and together (with COCOBOD), they will decide an optimal amount,” one COCOBOD source said.

A second source expressed confidence that the syndication would proceed successfully. At least one international bank has already inspected cocoa farms in Ghana, and another is scheduled to visit next month.

Production is expected to recover to 810,000 metric tons next season, the sources added. COCOBOD did not respond to a request for comment.

Ghana’s cocoa production has suffered due to adverse weather, disease, and smuggling. The 2023/24 season’s output is expected to be almost 40% below target.

COCOBOD reported losing around 150,000 tons of cocoa beans to smuggling and illegal gold mining (galamsey) in the 2022/23 season, with even greater losses anticipated this season due to rising global cocoa prices encouraging more smuggling.

Swollen shoot virus devastated approximately 590,000 hectares of farmland between 2018 and 2024, according to COCOBOD.

Despite these challenges, one source expressed confidence that Ghana would meet next season’s target of 810,000 tons, citing expected improvements in weather and rehabilitated cocoa farms boosting output.

Ghana’s cocoa export revenue fell nearly 50% year-on-year in the first four months of this year, according to central bank data.