BMI View: After experiencing a bumper crop in 2010/11, we foresee Ghanaian cocoa yields to be depressed in 2011/12 as weather is unlikely to be as good. While we forecast production to moderate in 2011/12 to 912,600 tonnes, we believe the Ghanaian cocoa regulator's decision to increase slightly its set price to buy cocoa will continue to encourage farmers to invest in their plantations With Ghana expected to do a better job of managing its natural resources than some of its less politically distinguished neighbours, income growth should occur across a wider spectrum of the population over the long term than is the norm in Sub-Saharan Africa.
Key forecasts
?? Cocoa Production Growth to 2015/16: 9.7% to reach 1.1mn tonnes. Yield gains are likely to continue. Rising GDP should allow easier credit access to cocoa farmers wanting to expand production. This growth, combined with the ageing stock in Côte d'Ivoire, has some optimistic observers predicting that Ghana could overtake Côte d'Ivoire as the world's largest cocoa producer and exporter within a few years.
?? Corn Production Growth to 2015/16: 16.9% to 2.0mn tonnes. Over the forecast period, we expect investment to encourage more modern, mechanised corn plantations to boost yields. Rising demand for corn as food and as poultry feed will also encourage production.
?? Poultry Production Growth to 2015/16: 48.8% to reach 60,400 tonnes. The relative affordability of poultry partly explains this superior growth outlook, while the popularity of imported poultry products is also factored in to this forecast.
?? 2012 Real GDP Growth: 7.7% (down from 14.7% in 2011; predicted to average 10.5% from now until 2016).
?? 2012 Central Bank Policy Rate: 14.5% eop in 2012 (up from 12.5% in 2011).
?? 2012 Consumer Price Index: 11.5% (up from 8.9% in 2011)
Industry Developments
As cocoa prices have halved since reaching record highs of GBP3,400/tonne in June 2010, farmers have been hoarding beans in an attempt to raise prices. Because the hoarding occurred at different times in Côte d'Ivoire and Ghana, an interesting divergence has emerged. In Côte d'Ivoire, stated port arrivals are down almost 30% year-on-year in 2011/12 to 78,000 tonnes, while port arrivals in Ghana have increased by 70% to 150,000 tonnes over the same period.
The significant difference between Ivoirien and Ghanaian port arrivals is indicative of a wider shift in the region. The Ghanaian government has suggested in the past that it can become the world's largest cocoa producer in the coming years, a view BMI sees playing out only towards the end of our forecast period at the earliest. Part of the significant increase in Ghanaian output in 2011/12 (and concomitant fall in Ivoirien port arrivals) could be explained by changes in smuggling flows. More specifically, the cocoa that would normally flow to Côte d'Ivoire due to artificially low prices in Ghana (which is mandated by the government to help domestic regulator Cocobod make a profit on exports) is more likely to stay in Ghana, as the difference between the global and Ghanaian price has declined in recent months. Nevertheless, BMI expects Ghanaian production to continue expanding at a strong pace over the long term, encouraged by government investment and better farmer education.
Despite rising calls for an all-out import freeze policy on frozen poultry, BMI believes that it is unlikely to happen as the Ministry for Food and Agriculture has reiterated in November 2011 that such a move would 'contravene the rules and conditions of international trade'. A better way would be to empower the local poultry industry to improve efficiency.
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