Ghana Cocoa Board (COCOBOD) is in advanced talks with cocoa traders, including Olam Group Ltd. and Barry Callebaut AG, to secure a $500 million bridge loan as it grapples with delays in securing its customary syndicated loan.
The industry regulator is seeking to raise at least a third of the $1.5 billion it typically borrows to finance the upcoming cocoa season, according to sources close to the negotiations.
This marks the second consecutive year that the world’s second-largest cocoa producer has turned to traders for financing as uncertainties over crop output have complicated discussions with traditional lenders.
COCOBOD relies heavily on these funds to purchase beans from farmers, supply fertilizers and chemicals, and support the broader agricultural ecosystem. The foreign exchange generated from the loan is also vital for stabilizing the nation’s currency.
Ordinarily, COCOBOD finalizes its syndicated loan in September, just before the start of the cocoa season. However, Ghana’s recent debt restructuring has introduced complexities, delaying last year’s loan until December.
This prompted COCOBOD to seek alternative funding, securing $400 million from traders in November and an additional $200 million in March when banks withheld part of the syndicated facility due to concerns over declining cocoa revenues.
These delays come amid a challenging period for Ghana’s cocoa sector, with output falling sharply due to adverse weather, disease, and fertilizer shortages. Despite projections of a 40% recovery in output to 700,000 tons for the 2024-25 season, lenders remain cautious, given the country’s recent track record of underperformance.
Ghana’s cocoa harvests have consistently missed targets, with production dropping from 683,000 tons in 2021-22 to 654,000 tons in 2022-23, and an anticipated further decline to 501,000 tons by the end of this season.
Additionally, the country is struggling to fulfill at least 250,000 tons of forward sales contracts, some dating back three years.
In response, COCOBOD plans to commence this year’s season a month early in September, aiming to curb smuggling and implement a new management system aligned with EU deforestation regulations.
This move by the country’s cocoa sector regulator underscores the urgency of securing the necessary funding to ensure the smooth operation of Ghana’s vital cocoa industry.
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Source: Bloomberg
