The political economy of pricing and price risk in Ghana’s cocoa marketing system

The price of cocoa beans is highly volatile and largely determined at the international commodity exchanges in London and New York. The Ghanaian economy relies heavily on the export of cocoa beans to generate foreign reserves, and many Ghanaian citizens rely directly or indirectly on cocoa beans for income generation. Highly volatile cocoa prices translate into volatile revenues, income and exchange rates, which pose challenges for the Ghanaian government to manage its internal and external balances. Drawing on John R Commons’s institutional economics, we propose an institutional theory of price to understand the pricing mechanisms along the cocoa chain. Using interviews with cocoa stakeholders in and outside Ghana in 2024 and a map of the pricing points along the cocoa chain, we then provide a political economy analysis of cocoa pricing and the distribution of price risks. We argue that Ghana’s price risk is currently managed by its counterparties to its disadvantage, with large multinational companies reaping the benefits from the current institutional arrangement. We provide tentative policy suggestions that would enable Ghana to gain greater flexibility in and control over managing its cocoa price-risk exposure.