Ghana Agribusiness Report Q2 2011 - new market report published

Ghana Agribusiness Report Q2 2011 - Our View: Ghana is the world´s second-largest cocoa producer behind its neighbour Côte d´Ivoire. That country´s current political crisis may have ramifications for Ghana´s cocoa industry if it becomes protracted or deteriorates into civil war. Price rises likely in the coming weeks could encourage Cocobod to raise its fixed prices. In the event of
long-term unrest in Côte d´Ivoire, which should mean rises in plantings in Ghana and a chance for the country to gain ground on its neighbour.

Key Views

- In 2010/11, we expect to see a year-on-year rise in corn production of 2.2% to 1.66mn tonnes. Rising demand for corn as poultry feed is the main driver of production.

- The same year we are forecasting sorghum production of 375,000 tonnes, up 6.7% year-on-year. With demand for sorghum as food, feed and in beer manufacture rising, we expect output to rise 39.7% to reach 490,000 tonnes in 2014/15.

- Poultry production to rise to 38,000 tonnes in 2011, though imports will rise to 164,000 tonnes. Over the forecast period, we expect production to rise 82% to reach 58,000 tonnes in 2015.

- We have raised our forecast for Ghanaian cocoa production in 2010/11 to 788,000 tonnes on the back of increased yields this season. The figure represents a 12.6% rise on the previous year´s output.

Industry developments New USDA figures show that sorghum production has made an impressive recovery following the 2007/08 season, when the harvest was devastated by floods. That year, production slumped to just 155,000 tonnes, down more than 50% year-on-year. In 2008/09, production bounced back to 331,000 tonnes, while last year it rose a further 6.0% to reach 351,000 tonnes.

There is a risk that cocoa supply from Côte d´Ivoire could be disrupted should the current political standoff between Laurent Gbagbo and Alassane Ouattara descend into serious violence or even renewed civil war. In such an event, cocoa prices would likely rally sharply above the GBP2,100/tonne level as the market is tight by historical standards. Continuing price rises would increase the chance that Ghana´s Cocobod would raise its own prices again. Should this happen, we can expect plantings to increase, posing an upside risk to our production forecasts.

With rises in Ghanaian poultry production being far outstripped by rises in cheap imports, there is a growing chorus of voices demanding controls on imports. In December 2010, senior food ministry official Dr Anthony Nsoh Akunzule said the importation of frozen chicken from the EU and other countries had been so overwhelming that local producers could not compete. The imports were often half the price of the local product. The Ghana National Association of Poultry Farmers has called for restrictions on the number of import permits the government issues. We see upside risk in our production forecasts if the government decides to act against imports.