Economic shocks and the growth of the Ghanaian cocoa industry from 1975 to 2019

Abstract

In this study, we sought to identify some economic shocks that have affected the Ghanaian cocoa industry and the effects of these shocks based on available annual data over the 45-year period from 1975 to 2019. The analysis was conducted using a simple autoregressive model of the cocoa industry. The results of the analysis indicated that the major economic shocks affecting the cocoa industry in Ghana were political instability arising from military coups, producer price shock linked to very high producer prices, the La Cote d’Ivoire civil wars between 2002 to 2007, and 2010 to 2011, which resulted in large-scale smuggling of cocoa beans across the border to Ghana for sale, and the El Nino weather shock characterized by severe droughts and very low amounts of rainfall, which dampened the production of cocoa beans in Ghana. The negative shocks were the El Nino weather phenomenon and political instability. The positive shocks were the very high producer prices and La Cote d’Ivoire civil war. We suggest some recommendations. These include increased resourcing of the Ghana Meteorological Agency to improve its prediction of extreme weather effects whose occurrence affect the production of crops such as cocoa, the establishment of bigger price stabilization funds by the Ghana Cocoa Board to support the cocoa industry, and research studies to analyse the apparent link between dramatic drop in cocoa production and explosive depreciation of the Ghanaian currency, the Ghana cedi.