Cocoa Farmers to Get 70 Percent Price Guarantee Govt Pushes Law to Improve Earnings - President Mahama

Ghana is poised to introduce a landmark legal reform aimed at significantly improving the earnings of its cocoa farmers. A new Cocoa Board Bill is set to be laid before Parliament, mandating that cocoa farmers receive a minimum of 70 percent of the gross Free On Board (FOB) price for their produce. This proposed legislation also includes an automatic price adjustment mechanism to align producer prices with global market movements and exchange rate fluctuations, ensuring greater transparency and stability in farmer incomes. The bill represents a pivotal shift in Ghana’s cocoa pricing policy, moving towards a more market-responsive and farmer-centric model, alongside a commitment to process at least 50 percent of the nation's cocoa locally to add value and create jobs within the sector.

Ghana, the world's second-largest cocoa producer, is on the cusp of a significant legal transformation within its vital cocoa sector. The government has announced its intention to introduce a new Cocoa Board Bill in Parliament, a legislative initiative designed to guarantee cocoa farmers a minimum of 70 percent of the gross Free On Board (FOB) price for their produce. This proposed law seeks to address long-standing concerns regarding farmer remuneration and the equitable distribution of wealth generated by Ghana's cocoa industry.

The forthcoming bill is not merely a pricing adjustment; it represents a comprehensive reform package aimed at fundamentally restructuring the cocoa value chain. Beyond the price guarantee, the legislation is expected to introduce an automatic price adjustment mechanism, linking domestic producer prices directly to international market dynamics and prevailing exchange rates. This move is intended to provide farmers with greater income predictability and stability, shielding them from the volatility of global commodity markets.

This legislative push underscores the government's commitment to enhancing farmer livelihoods and ensuring the long-term sustainability of the cocoa sector, which remains a cornerstone of the Ghanaian economy. The bill also signals a strategic shift towards increased local processing of cocoa, with a mandate to process at least 50 percent of the country's output domestically, thereby fostering industrialisation and job creation.

The regulatory framework governing Ghana's cocoa sector is primarily anchored in the Ghana Cocoa Board Act, 1984 (PNDCL 81), which established the Ghana Cocoa Board (COCOBOD) as the central authority for the industry. COCOBOD's mandate includes regulating the marketing and export of cocoa, securing favourable arrangements for its purchase and sale, and promoting the general welfare of cocoa farmers. Historically, COCOBOD, through its subsidiary, the Cocoa Marketing Company (CMC), has held a monopoly over the external marketing of raw cocoa beans, playing a crucial role in price stabilisation and quality control.

Under the existing system, the Producer Price Review Committee (PPRC), comprising various stakeholders including COCOBOD, the Ministry of Finance, and farmer representatives, determines the producer price at the beginning of each crop season. This price is fixed for the season, aiming to protect farmers from world market price fluctuations. While the government has historically targeted providing cocoa farmers with approximately 70 percent of the *net* FOB price, this has not always been consistently achieved, and the fixed price mechanism has often meant farmers do not fully benefit from bullish international markets.

Challenges such as volatile global prices, currency depreciation, and rising input costs have frequently led to a disparity between farm-level incomes and the broader wealth generated by the global cocoa industry. This has prompted calls for more transparent and responsive pricing mechanisms to ensure that the primary producers receive a fairer share of the value chain. The current legislative initiative builds upon these historical discussions and aims to formalise a more robust guarantee for farmer earnings.

The proposed new Cocoa Board Bill marks a significant departure from previous pricing methodologies by enshrining a mandatory minimum of 70 percent of the *gross* FOB price for cocoa farmers. This is a crucial distinction from the previous target of 70 percent of *net* FOB, as it implies a larger share of the total export value being passed directly to farmers before other deductions. The bill is designed to introduce an automatic price adjustment mechanism, ensuring that producer prices dynamically respond to movements in the world market price and exchange rate fluctuations. This mechanism is intended to provide unprecedented transparency and predictability, allowing farmer income to move in step with global market realities, with the 70% floor acting as a vital livelihood guarantee.

This reform is particularly pertinent given the recent volatility in global cocoa prices. While prices surged to record highs in late 2024, they subsequently experienced a sharp decline, highlighting the vulnerability of farmers to market swings. The government's decision to maintain the producer price for the 2025/26 light crop season despite a decline in international prices underscores the commitment to farmer stability, even before the new bill's full implementation. The new bill aims to institutionalise this protective measure, making the 70% guarantee a legal obligation rather than a discretionary policy.

Beyond pricing, the proposed legislation also mandates that at least 50 percent of Ghana's cocoa output be processed locally from the 2026/27 crop season. This strategic focus on value addition is intended to create jobs, stimulate industrial growth, and capture a larger share of the global cocoa value chain within Ghana. Furthermore, the reforms include a transition to domestic financing through a cedi-denominated cocoa bond and a balance sheet restructuring for COCOBOD, aimed at restoring financial health and reducing reliance on external borrowing for cocoa purchases. These integrated measures seek to build a more resilient and financially sustainable cocoa sector.

However, the implementation of such a robust price guarantee and automatic adjustment mechanism will require careful financial management and oversight. COCOBOD's financial health and its ability to absorb potential shocks from extreme market downturns will be critical. The review and enhancement of the Ghana Cocoa Board Act, 1984 (PNDCL 81) and other relevant legislations, which COCOBOD is currently undertaking with consultants, will be crucial in establishing a robust legal framework that addresses these critical issues and aligns with international standards, including new EU regulations on deforestation and child labour.

The impending new Cocoa Board Bill, with its core guarantee of 70 percent of the gross FOB price for cocoa farmers and an automatic price adjustment mechanism, represents a transformative legal development for Ghana's cocoa sector. For legal practitioners advising stakeholders in the industry – including farmers, Licensed Buying Companies (LBCs), processors, and exporters – understanding the nuances of this legislation will be paramount. The shift towards a more transparent and market-responsive pricing model will necessitate a re-evaluation of existing contracts, financing arrangements, and risk management strategies.

Practitioners should closely monitor the bill's passage through Parliament and the subsequent promulgation of any subsidiary legislation or regulations that will detail its operationalisation. The mandate for increased local processing will also open new avenues for investment and legal considerations related to industrial development, trade, and intellectual property. This comprehensive reform package signals a new era for Ghanaian cocoa, one that prioritises farmer welfare and domestic value creation, demanding proactive engagement and adaptation from all legal professionals operating within this vital economic sector.