Ghana’s COCOBOD: state-dominated market governance suited to large-scale, bulk cocoa trade – not possible for Liberia

Cocoa is Ghana’s principal cash crop and primary source of export revenue. Established in 1947, the Ghana Cocoa Board (COCOBOD) is the sector regulator and one of the country’s largest public institutions. From planting to export, it is involved in almost all parts of the value chain and has a monopoly in the provision of inputs, research, quality control, processing and exports. Such a structure requires a high level of technical, operational and financial capacity which Ghana has taken decades to build up.

COCOBOD consists of a handful of divisions and subsidiaries, each with a distinct role in Ghana’s cocoa industry:

• The Seed Production Division (SPD) produces and distributes hybrid cocoa seed pods developed by another subsidiary: the Cocoa Research Institute of Ghana (CRIG). These varieties have contributed to the intensification of farming practices in Ghana since the 2010s. Plants begin to yield fruit  within two years of planting – compared to around five for many traditional varieties – and are more resistant to pests and diseases, though not often demanded by premium buyers.
• The Cocoa Health and Extension Division (CHED) provides training and inputs to farmers, including subsidised fertiliser and pesticide through the Cocoa Disease and Pest Control Programme. These services are paid for by farmers through compulsory deductions from the Free on Board (FOB) export price received by COCOBOD.
• The Quality Control Company (QCC) is responsible for ensuring that cocoa exports meet COCOBOD specifications. The QCC completes inspections, from the village level to the point of export.
• The Cocoa Marketing Company (CMC) is the only entity permitted to sell Ghanaian cocoa on the world market. It is responsible for purchasing, storage, transportation and marketing. CMC trades around 70% of the national crop on the international futures market and uses cocoa contracts with multilateral buyers as collateral to receive cheap US dollar loans.

The services provided by these divisions, coupled with massive production, help Ghana to retain its position as a global giant in the supply of homogenous quality cocoa to the bulk market. Such a structure would be unsustainable in countries with lower production volumes, since government capacity and resources to deliver these capital-intensive functions would be significantly lower. Further, the requirements associated with establishing governmental services (as would be needed in Liberia) to support farmers in producing a reliable supply of consistent quality cocoa increases the risk of governments falling into substantial debt under this model.

Ghana is the world’s second largest cocoa producer, after neighboring Cote d’Ivoire. Even at Ghana’s scale, COCOBOD reports consistent operational losses while falling short on certain functions – for example, farmers frequently complain that inputs fail to reach them at the required point in the growing season.

Shortcomings of Liberia’s LPMC model (1961-2014)

Created in 1961, the Liberia Produce Marketing Corporation (LPMC) was a government agency responsible for marketing Liberian cocoa and other agricultural produce along the same lines as COCOBOD. It collapsed in 2014 after accumulating unsustainable levels of debt.

According to the FAO, LPMC suffered from management challenges throughout its existence, falling short on pricing and quality control services and failing to attract steady financing. By 2006, the corporation owed farmers some US$3.5m for produce supplied in the preceding few years. Claims against the government grew to a reported US$30m, while a much larger sum was owed to foreign buyers after LPMC failed to deliver produce in return for advanced payments.

The small scale of the Liberian cocoa trade was one factor undermining the model’s commercial viability. By 2010, LPMC had no capacity to buy produce and transferred its statutory purchasing mandate to local traders.

Opportunities and limitations of the COCOBOD model in Liberia’s push for premium

In 2020, Liberia’s cocoa volumes represented less than 1% of Ghana’s output. In order to attract buyers, Liberia needs to cultivate a profile that sets it apart from the bulk market giants. By focusing on its uniqueness and ensuring consistent supply of highquality produce, Liberia can attract premium buyers from smaller market segments that are willing to pay more for   distinctive cocoa characteristics. A more flexible, liberalised regulatory function that permits individuality among producers and encourages innovation, whilst reducing the financial burden on the government, is essential for Liberia to attract premium investment.

While Ghana’s robust quality control system is aligned with premium market requirements, it is difficult under the COCOBOD model to adhere to stipulations around traceability, required by buyers of single origin cocoa and organic certification, which is demanded as standard by most premium buyers. In contrast, the vast majority of Liberian cocoa is free from chemical inputs due to a low level of access, which – although potentially limiting short-term productivity – will assist farmers pursuing organic certification and gaining access to the associated premiums as bulk market prices remain stagnant.

The highly controlled nature of the Ghanaian cocoa sector means that farmers are unable to break the cycle of poverty caused by unfavourable conditions on the bulk market. A joint attempt by Ghana and Cote d’Ivoire, whose combined output represents some two-thirds of the global cocoa supply, to set a premium of US$400 per tonne to increase farmers’ earnings has not been successful. As a result, more than 90% of Ghanaian cocoa farmers were living below the living income line in 2020.

Liberian cocoa possesses characteristics which set it apart from the homogeneity of Ghanaian output driven by COCOBOD’s intensive farming policies. Unlike Ghana’s uniform hybrid seedlings, Liberia boasts old, rare genetic tree varieties which appeal to specialty buyers looking for a unique product and flavour. These are complemented by Liberia’s swathes of intact primary rainforest, which – providing it remains protected – increase the appeal of Liberian cocoa to a growing market of forest friendly chocolate consumers. Conversely, Ghana and Cote d’Ivoire are largely eliminated from this high value market opportunity as the intensification of cocoa farming, including the introduction of hybrid varieties which require less shade, has been a key driver in the reduction of forest cover by more than 70% in the past 30 years.

The opportunities presented by the Liberian context for premium buyers call for a nimble, light-touch form of regulation which focuses on increasing bean quality so as to improve Liberia’s international reputation. While COCOBOD’s quality control mechanisms have assured Ghana’s standing as a reliable supplier of consistent-quality cocoa, the model is otherwise unsuited to the Liberian market.

About GROW Liberia

GROW is an agribusiness and investment advisory agency that partners with businesses, investors, associations and government agencies to accelerate inclusive economic returns within high-growth industries in Liberia. We promote forest-friendly cocoa production by discouraging deforestation, promoting the rehabilitation of existing farms, and championing the use of organic farming methods. GROW is also providing support to businesses seeking to market Liberian cocoa to international buyers who are willing to pay more for forest-friendly cocoa. In addition, we offer facilitation and guidance to buyers seeking to source high-quality, sustainably-produced Liberian cocoa.

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