GHANA AGRICULTURAL AND RURAL SECTOR HIGHLIGHTS, DECEMBER

UNCLAS SECTION 01 OF 02 ACCRA 001517

WHITE HOUSE FOR USTR LAURIE-ANN AGAMA
DEPT EEB FOR USITC BRENDAN LYNCH AND MICHAEL FERRANTINO

SIPDIS

E.O. 12958: N/A
TAGS: EAGR ECON ETRD EINV SENV GH
SUBJECT: GHANA AGRICULTURAL AND RURAL SECTOR HIGHLIGHTS, DECEMBER
2008


1. SUMMARY:


A. Ghana has benefitted this year from higher cocoa prices and
increased U.S. investment in cocoa processing facilities.


B. The EU and Ghana signed an agreement to combat the export of
illicit timber to be implemented in 2009. This could potentially
impact more than 50 percent of Ghana's timber exports, or shift
exports to less restrictive markets.


C. Notwithstanding increased input costs, Ghana's agricultural
productivity is expected to rise in 2008. The performance is partly
explained by 2007's poor environmental conditions; in 2008 Ghana's
farms benefitted from favorable weather. In a bit of last-minute
vote seeking, President Kufuor promised an expanded MCC rollout in
agricultural areas of the country despite a lack of funding.


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A. U.S. Investment Boosts Cocoa Economy
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2. Cocoa: Ghana has benefitted from a 36 percent increase in the
market price of cocoa, up to GH Cedis 1,632 per metric ton for the
2008/2009 cocoa season. The GOG announced plans to improve the
roads used to transport cocoa from farms to export and processing
facilities. The GOG has also agreed to pursue the goal of domestic
value-added processing of more than 50 percent of Ghana's cocoa
production by the middle of next year - an achievable target
(current capacity exists for processing up to 40 percent of the
annual cocoa crop).


3. U.S. investment in the cocoa sector increased in the past month:
Cargill has completed a 60,000-ton capacity cocoa processing factory
in Accra's port of Tema that is expected to begin operations in
November. Agribusiness leader Archer Daniels Midland (ADM) is
expected to begin operating its own processing facility next year in
Kumasi, Ghana's second city. This new U.S. investment in the cocoa
sector is anticipated to bring Ghana's processing capacity to
380,000 tons.


4. COMMENT: As commodity prices rise, optimism comes easily to
Ghana's Cocoa Board, COCOBOD, which tightly controls the cocoa
export market through centralized purchasing mechanisms. While the
new U.S. investment in processing represents a solid increase above
current levels, Ghana has also ambitiously targeted an increase in
overall cocoa bean production to 1 million tons, an implausible rise
from International Cocoa Organization 2008-9 cocoa year projections
of 747,000 tons. END COMMENT.

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B. EU-Ghana Agreement on Illicit Timber
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5. The Forestry Research Institute of Ghana (FORIG) reports that
poor logging practices, over-exploitation of forest reserves,
illegal chain saw lumbering and firewood extraction have led to the
depletion of 85 percent of Ghana's forest reserves. World Bank
estimates suggest that 60 percent of logging in West Africa in
recent years has been conducted illegally.


6. In September 2008, the GoG signed a trade agreement with the
European Union (EU) to combat the exports of illegal timber. The
agreement is expected to commence in late 2009, and originates from
the European Commission's 2003 Action Plan on Forest Law
Enforcement, Governance and Trade (FLEGT.) After a 21 month
transition process, the agreement requires Ghana to implement a
transparent system for collecting timber taxes and to enforce better
compliance with forest sector laws. The agreement also permits the
EU to install border measures that will ensure that unlicensed
Ghanaian wood is not imported into the European market. COMMENT:
This agreement could have a significant impact in Ghana, given that
Europe accounts for more than 50 percent of Ghana's timber exports.
Alternatively, it could simply lead to the redirection of timber
exports to less restrictive markets. END COMMENT.


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C. Agriculture: Higher Costs, Better Weather & Political Liberties
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ACCRA 00001517 002 OF 002



7. Ghana's agriculture sector was hurt in 2008 by rising costs of
inputs such as fuel, seeds, fertilizers, fishing gear and
agricultural machines. Nonetheless, rates of agricultural growth
are predicted to increase for 2008. Floods and droughts made 2007 a
bad year; agricultural growth rates fell by 3.1 percent from the
revised growth rate of 4.5 percent in 2006. For 2008 (according to
the Statistics, Research and Information Department at the Ministry
of Food and Agriculture),agricultural growth rates and food
production are expected to rise on on the basis of favorable
environmental conditions. In the Northern Region, which was
impacted in 2007 very severely, production of maize was expected to
increase from 88,038 tons in 2007 to 131,859 tons this year.
Likewise, the production of rice in Northern is estimated to
increase from 65,532 tons in 2007 to 105,496 tons in 2008.


8. In response to the global food crisis and increased commodity
prices, the GOG has reduced import tariffs on rice, wheat, yellow
maize and vegetable oils. It has also initiated a fertilizer
subsidy program, to alleviate 2008's 40 percent price rise.


9. On November 8, 2008 President Kufuor announced at a Farmers' Day
celebration in Techiman that the Millennium Challenge Account would
be rolled out to cover additional districts in Brong Ahafo and
Western regions to increase food, livestock and fish production.
This statement was slightly misleading. The Millennium Challenge
Corporation (MCC) Compact cannot be extended to additional districts
(i.e. Brong Ahafo and Western regions). MCC's national implementing
entity in Ghana is the Millennium Development Authority (MiDA),an
authority of Government of Ghana created by an Act of Parliament.
Pursuant to its domestic mandate, MiDA has the legal capacity to
solicit and manage funds from sources beyond the MCC. However, to
date, no additional revenue streams have been identified.

TEITELBAUM