For decades, Ghana’s cocoa sector operated under a relatively stable and predictable financing arrangement anchored in syndicated loans from international banks.
These annual syndicated facilities ensured that, regardless of market shocks or cash flow pressures, there was continuous liquidity throughout the cocoa season to purchase beans from farmers via Licensed Buying Companies (LBCs).
Once the season started, funds were available until the very last bag of cocoa was bought.
That system broke down beginning in the 2024/25 cocoa season. The reasons for this breakdown are structural, contractual, and financial.
Loss of Syndicated Financing
In the 2023/24 season, COCOBOD entered into forward sales contracts to supply 800,000 metric tons of cocoa.
However, due to production shortfalls, smuggling, operational inefficiencies, and financial constraints, Ghana failed to honor these contracts. The country fell short by 333,767 metric tons, which had to be rolled over into subsequent seasons.
This failure to deliver fundamentally undermined Ghana’s credibility in the eyes of international lenders.
As a result, for the 2024/25 season, Ghana was denied access to the traditional syndicated loan facility. Compounding this problem was the Domestic Debt Exchange Programme (DDEP), which severely weakened COCOBOD’s balance sheet and impaired its cash flows.
The DDEP not only affected government finances but also directly impacted state-owned institutions like COCOBOD, which depended on predictable financial instruments.
With weak financials, unresolved rolled-over contracts, and exposure from the DDEP, the international banking community effectively shut the door on Ghana, making syndicated financing impossible.
Shift to Off-Taker Financing and the 60/40 Model
Faced with the collapse of syndicated financing, COCOBOD adopted an alternative emergency financing model.
Under this arrangement, off-takers (buyers) agreed to pre-finance cocoa purchases but under strict and commercially protective conditions.
First, Ghana was required to service the rolled-over 333,767 metric tons at the original contract price of $2,600 per ton, even though market conditions and farm-gate prices had changed significantly.
Second, the buyers insisted on determining which LBCs would receive funds, effectively bypassing COCOBOD’s traditional centralized control over cocoa purchasing.
The financing structure for the 2024/25 season was termed 60/40, meaning 60% of the contract value was paid up-front, while the remaining 40% was paid only upon shipment of cocoa.
Crucially, COCOBOD’s operational margins, including payments to LBCs, haulers, and internal costs, were embedded largely in the 40% portion.
This meant COCOBOD could only fully operate once shipments were completed and the balance was released.
Under this same arrangement, COCOBOD had to service both the rolled-over cocoa and new contracts signed for the fresh crop, placing enormous strain on cash flows.
For the 2025/26 season, management decided to continue with this model, not because it was ideal, but because COCOBOD’s financial books remained weak.
The goal was to stabilize and clean up the books as a prerequisite for restoring syndicated financing in the future.
However, to prioritize farmer welfare, the structure was adjusted from 60/40 to 80/20, ensuring that more cash was available upfront so farmers could be paid promptly.
Despite these efforts, the cost of servicing old obligations has been heavy. COCOBOD has already serviced over 235,000 metric tons of the rolled-over contracts at an average loss of about $500 per ton.
This loss arose because the contract price was $2,600 per ton in 2023/24, while the farm-gate price rose to about $3,100 per ton in 2024/25. The difference has had to be absorbed by COCOBOD.
Public claims that farmers have not been paid since November do not fully reflect the realities of the new financing model.
Under the off-taker financing system, some LBCs received direct funding and therefore paid farmers immediately for cocoa purchased.
However, LBCs that were not selected by off-takers had to rely on their own resources to buy cocoa and later submit it to COCOBOD through the Cocoa Marketing Company (CMC).
While COCOBOD does have outstanding obligations, it is inaccurate to say no payments have been made.
Payments have been effected between November and February, although delays occurred due to shipment schedules and the release of the remaining financing tranches.
Collapse of International Cocoa Prices
The challenges have been worsened by a dramatic fall in global cocoa prices. In 2024, prices peaked at nearly $12,000 per ton, but by late 2025, prices had collapsed to around $4,000 per ton, where they continue to hover.
This decline has affected all producing countries, including Ghana and Côte d’Ivoire.
Although Côte d’Ivoire has not officially announced a price reduction, reports indicate that cooperatives are selling cocoa at discounted prices.
Ghana’s position is particularly difficult because its cost structure is high. From farm-gate price to shipping, Ghana spends not less than $6,300 per ton, which is well above the prevailing international price of $4,000.
This price mismatch has caused buyers to hold back from signing new contracts, further constraining liquidity.
Nonetheless, it is important to note that 580,000 tons out of a projected 650,000 tons for the 2025/26 season have already been bought, graded, and sealed, demonstrating continued operational activity despite market stress.
The price of cocoa in Ghana is not arbitrarily set. It is determined by the Producer Price Review Committee (PPRC), which includes representatives of farmers, the Ministry of Finance, the Bank of Ghana, transporters, LBCs, and COCOBOD.
Until this committee formally meets and takes a decision, the current farm-gate price remains unchanged.
The government and COCOBOD have reiterated their commitment to securing the best possible outcome for farmers, with announcements expected once deliberations are concluded.
Concerns have also been raised about the purchase of new vehicles by COCOBOD.
These vehicles were procured strictly for operational purposes and were not financed from funds meant for farmers.
The funding came from a residue fund, an Internally Generated Fund (IGF) belonging to the Board.
The objective is to improve operational efficiency, which ultimately benefits farmers.
It is also important to note that about 70% of COCOBOD’s operational vehicles are over 10 years old, making replacement unavoidable.
COCOBOD’s finances are burdened by several legacy expenditures.
These include a $48 million jute sack procurement despite adequate stock, GHS 26 billion spent on cocoa roads, including GHS 21 billion from 2018 to 2021 with no budget for those years, and a $350 million program aimed at rehabilitating 156,400 hectares of cocoa farms, but only 40,000 hectares were completed, with an additional GHS 700 million later spent. Overall, COCOBOD’s total debt stands at approximately GHS 32.9 billion.
The challenges facing Ghana’s cocoa sector are not the result of a single decision or season.
They are the cumulative outcome of contractual defaults, weakened finances, global market shocks, and legacy debts.
While the current financing model is far from perfect, it represents a stopgap measure to keep the sector functioning, protect farmers, and gradually restore financial credibility.
The path forward lies in discipline, transparency, and restructuring, not simplistic narratives that ignore the deeper realities confronting COCOBOD and the cocoa economy.
Source: Myxyzonline.com
