Enhancing agricultural diversification – how cashew and soybean can boost commodities exports

Ghana is famously known for commodities such as cocoa, gold, and shea. These commodities have proven to be important earners for our economy. For example, according to the Bank of Ghana, exports of cocoa beans and products amounted to US$2.29 billion in 2022.

Thankfully, other commodities like cashew and soybean have gained ground and hold significant potential to further boost the country’s economy, diversify our export base and improve the livelihoods of local producers.

Statistics from the Ghana Export Promotion Authority indicate that earnings from Non-Traditional Exports (NTEs) increased from US$2.84 in 2020 to US$3.33 billion in 2021. Cashew nuts constitute one of the top ten NTEs.

This proves that agricultural produce such as cashew and soybean have the potential to generate foreign exchange for Ghana. However, to fully realize this potential, policy amendments and strategic government interventions will have to be put in place.

Commodities are generally raw materials; basic resources that tend to come from the earth and are produced in large quantities. Commodities are products that possess uniform qualities and are interchangeable with other goods of the same type. Some commodities include grains, oil, natural gas, cocoa, coffee, sugar, livestock, minerals and precious metals.

Commodities can be classified into soft and hard commodities. Soft commodities are goods that are grown, harvested or reared such as coffee and soybean. Hard commodities are natural resources that are mined or extracted from the earth such as gold and oil.

Commodities may be further categorized according to their purposes. These categories include agriculture (sugar and corn), metals (copper and silver), energy (crude oil and coal) and livestock (cattle and leather).

Commodities can be traded on exchanges such as the Chicago Board of Trade (CBOT), Chicago Mercantile Exchange (CME), New York Mercantile Exchange (NYMEX) and the London Metal Exchange (LME).

The four dominant agricultural commodities traders, also known as the ABCDs are Archer-Daniels-Midland (ADM), Bunge, Cargill and Louis Dreyfus Company (LDC). They control about 70 percent of the global food market.

Other notable global trading companies include Wilmar International, and Olam International who presently operate in Ghana. The definition of commodities has been expanded to include financial products such as foreign currencies and indexes. This article refers to the more traditional examples of commodities such as grains and oil.

The article seeks to focus more specifically on cashew and soybean also referred to as soya bean. Cashew and soybean hold the potential of becoming important commodities for exportation.

Cashew and soybeans exports

Cashew: The global cashew market was valued at US$7 billion in 2022 and is projected to reach US$10.5 billion in 2031. India is one of the world’s largest producers of cashew with a production of about 700,000 tons of cashew in 2022.

The current upward demand for cashew is being fueled by the marketing of cashew as a source of healthy fats, protein and fiber. Cashew nuts are packed with nutrients such as iron and magnesium and are high in fiber. Cashew nuts are versatile and are used as ingredients in breakfast cereals, energy bars, nut spreads/butters, condiments and sauces such as pesto.

Cashews nuts can also be enjoyed simply roasted salty or sweet snacks. Cashew is the third most popular nut after almonds and walnuts accounting for 17percent of world tree nut production in 2020. Cashew trees thrive in tropical climates.

Cashew production in Ghana has grown significantly over recent years. According to official data from the Ministry of Food and Agriculture, in 2022 Ghana produced about 200,000 tons of Raw Cashew Nuts (RCN) per 234,171 hectares.

The sector has contributed substantially to the nation’s economy, with export revenues reaching approximately US$300 million in 2023. Major cashew producing regions include Bono, Bono East, Ahafo, Northern and Upper West Regions.

Currently, most of the country’s cashew export is raw cashew nuts, which limits value addition and reduces potential profit margins for local farmers and processors. The story is similar for most African countries.

The majority of cashew nuts emanating from Africa are exported as raw nuts without deshelling. Even though the African continent produces about 57percent of the world’s raw cashew nuts, the continent has a share of only 6.6percent of the shelled cashew export market.

Soybean: Soybean production is also on the rise in Ghana. In 2022, the country produced approximately 250,000 tons and exported US$29.5 million worth of soybeans. However, Ghana has the potential to produce about 700,000 tons of soybeans per year. The current production figures represent only about 26percent of the country’s potential.

The five major destinations of the country’s soybean export are the United States (US$15.3 million), Turkey (US$7.13 million), India (US$4.48 million), Canada (US$1.27 million) and Togo (US$791,000).

The major producing regions are primarily the Northern and Upper East regions. Soybean holds great potential due to its versatility and high demand in both local and international markets. Soybeans can be processed into cooking oil and animal feed particularly for the poultry industry.

Governing bodies

The Tree Crops Development Authority (TCDA) is a government body established in 2020 by the Tree Crops Development Authority Act, 2019 (Act 1010). TCDA is tasked to regulate and develop in a sustainable environment the production, processing, and trading of six tree crops in Ghana namely, cashew, shea, mango, coconut, rubber, and oil palm and to diversify Ghana’s agricultural sector beyond cocoa.

As part of its various functions, the TDCA is to implement policies to ensure the viability of the tree-crop sub sector; conduct and promote research to develop the sector and regulate, register, coordinate and promote all activities relating to tree crops.

The Ghana Commodity Exchange (GCX) is an entity set up to establish linkages between agricultural commodity producers and buyers, to secure competitive prices for these products while assuring the market quantity and quality of the products and timely settlement.

Through the establishment of the national commodity exchange and its supporting infrastructure, GCX aims to promote the commercialization of Ghana’s agricultural sector, improve market access, increase market efficiency and lower transaction costs.

Governing regulations

The Tree Crops Regulations, 2023 (L.I. 2471): L.I. 2471 was passed to aid the operations of TDCA. The purpose of the Tree Crops Regulations is to regulate the tree crops industry by providing for the registration and licensing of value chain actors in the tree crops industry and compliance and safety standards for the industry amongst others. L.I. 2471 outlines protocols for nursery operators, aggregators, and processors to uphold quality standards and fair practices.

The Regulations also introduce pricing mechanisms to incentivize farmers and safeguard their interests. L.I. 2471 requires actors who fall into the category of main actors or auxiliary actors in the tree crops value chain to register with the Authority.

Main actors are categorized into:

• Farmers or producers
• Aggregators
• Nursery Operators
• Traders
• Processors, Millers, Refiners
• Exporters and Importers
• Service providers, including

1. On-farm service providers such as weeders, sprayers, extension service providers, seed nut producers, nursery operators;
2. Input dealers such as dealers in agro-chemicals and fertilizers;

• Logistics providers such as providers of transport and evacuators; and

1. Providers of packhouses and warehouses.

It is important to note that an aggregator license is only issued to a citizen. Currently the marketing of cashew is unregulated, leading to price fluctuations. Aggregators and buyers may have an upper hand determining when to buy and the price at which to buy the produce. It is expected that the enforcement of this Regulation would boost competitiveness, productivity, profitability, and sustainability in the tree crop value chain.

The Export and Import – Restrictions on Exportation of Soya Bean, Regulation 2020 (L.I. 2432): L.I. 2432 was passed to regulate soybean trade in Ghana. The regulation provides the licensing system for the exportation of soybean in commercial quantities to ensure availability of the beans for domestic use to meet local processing requirements. Soybeans and maize are important ingredients used in processing poultry feed. However, there have been appeals by farmers to lift the ban on the export of soybeans. According to farmers, the export restriction has resulted in the fall of prices of the commodity.

In addition to the regulation, the government in August 2024 imposed an immediate ban on the export of grains.  This is due to challenging drought conditions affecting the Northern regions of the country. The ban on the export of grains includes soybeans, maize and rice. This measure is intended to ensure these crops are available for the domestic market.

Challenges

Despite the increase in cashew and soybean production, local producers in these sectors face significant challenges, including inadequate infrastructure, limited access to finance, volatile market prices, lack of modern farming techniques and limited market access. As earlier indicated, most of the country’s cashew nut export is raw unshelled nuts which does not allow for value-addition.

This poses significant challenges since the global trade in shelled nuts is more lucrative than that of raw unshelled nuts. Another challenge in the cashew industry is the lack of adequate infrastructure to deshell cashew nuts in a safe way. In the case of soybeans, current production levels represent only a fraction of the country’s potential. Low production levels lead to concerns about food security. This is evidenced by the recent ban on the export of grains.

Recommendations

Amendments to encourage local processing/promotion of value addition: Revising the regulations to better support local producers and enhance the value chain is crucial. Specifically, L.I 2471 could include provisions that seek to encourage local processing. Such provisions can provide incentives for local processing of cashew nuts before export. The government may also offer tax incentives for investments in local processing facilities and provide subsidies for inputs and equipment to enhance productivity. This would increase value addition and create more jobs locally.

The government may consider investing in processing cashews. This is important because countries, most notably African countries, that do not process cashew nut on a significant scale retain a minimal portion of the value created in the global cashew market. Value addition for such countries holds significant potential to achieve job creation and additional revenues invariably leading to economic development.

Investments in processing may take the form of private-public partnerships. This issue of a lack of value addition permeates Ghana’s other critical exports, cocoa and gold where international chocolate producers and jewelry makers reap significant financial benefits while the producers of the raw material are left with small margins for their hard labour.

Boosting local production and demand: Encouraging local processing capacity goes hand in hand with boosting local demand of cashew nuts. Ghana needs the internal capacity to absorb what is processed.

This is imperative because if there is a slump in global demand in any particular season, local demand for products can still keep the sector afloat. Producers will not be left with unsold produce and unpaid loans. Regarding the soybean industry, boosting soybean production will help alleviate concerns about food security and improve the livelihood of farmers, thereby obliterating the need for periodic bans on the export of the crop.

 

Limiting raw cashew nut exportation: Another recommendation aimed at boosting the local value addition is to limit the exportation of raw cashew nuts. Implementing directives that restrict the export of raw cashew nut will ensure that more cashew nuts are processed in Ghana. This can be achieved by offering grants and low-interest loans to local businesses to start processing plants.

Foreigners may also be permitted to export provided the nuts are processed. An export limitation approach must be implemented in phases by gradually increasing local processing capacity over time. Doing so will increase the profits margins of local processors and invariably increase the country’s revenues.

One should however note that the local processing capacity is currently not enough to handle the entire output, this may lead to bottlenecks and reduced income for farmers. A directive on exportation will need to be balanced with measures such as incentives for enhanced local processing capabilities to create a more conducive environment for growth.

Setting sector specific standards: The relevant regulatory bodies on their own or in conjunction with other entities can develop standard forms of contracts to be used by parties in the cashew and soybean sector.

These entities can also offer arbitration and mediation services to parties who used the standard forms of contracts. An example is the Grain and Feed Trade Association (GAFTA) headquartered in London. GAFTA has developed various standards forms of contracts such as “General Contract for Grain in Bulk (FOB terms)”. The organization also provides parties who use their standard forms of contracts arbitration and mediation services to resolve disputes in a timely and efficient manner.

Setting strict quality control standards will enhance product quality to ensure Ghanaian cashew and soybeans meet international standards. There is a need to develop and implement certification systems, provide technical assistance to key stakeholders which will invariably boost the reputation of our commodities as high-quality products. Producers and processors must also be encouraged to adopt sustainable farming and processing practices, aligning the sector with current international environmental and ethical standards.

Enhancing the activities of relevant bodies: The government can also enhance the activities and powers of governmental bodies involved in the cashew and soybean sector. This institutional empowerment could be similar to that of Ghana Cocoa Board (COCOBOD) which plays a pivotal role in the cocoa sector.

For example, enhancing marketing activities by market development will help to increase diversification, standardize quality and promote Ghanaian cashew and soybeans globally. These entities can further negotiate trade agreements with new international markets and facilitate market access.

However, it is important to recognize the potential disadvantages of having such governmental monopolies in the export market, where single entities control the entire export process. This sometimes leads to market inefficiencies and lack of innovation. Monopolies may also lead to reduced competitiveness by stifling competitive pricing. Without competitive pricing, producers may receive lower prices for their produce thereby leading to exploitation. Another potential pitfall is bureaucratic inefficiencies where large boards become bureaucratic and unresponsive to market changes.

Case Studies: Côte d’Ivoire

Côte d’Ivoire has over the years become a leading global producer of cashew nuts. The country accounts for about 25percent of the world’s total production. Its gross cashew production grew from 400,000 tons in 2011 to 1 million tons in 2022. Cashews are the country’s third ranking exports after cocoa and refined petroleum products.

The commodity is a crucial source of income for producers and processors. Substantial investment in processing capacity helped Côte d’Ivoire expand its cashew exports. An example is the recent US$10 million loan from Norfund to Valency CIV to build a cashew processing plant with a capacity of 45,000 tons per year. Côte d’Ivoire has significantly expanded its export to the European market and in 2022 overtook India in terms of export to Europe.

VINACAS & CEPCI – Vietnam & India

The Vietnam Cashew Association (VINACAS) is an organization representing Vietnam’s cashew industry, which includes producers, processors, traders and exporters. It was founded in 1990 and has played a major role in supporting and promoting the development of Vietnam’s cashew sector, making it one of the largest in the world. The Association has led initiatives to modernize cashew processing plants, making the country a hub for advanced cashew processing technology. Regarding value addition, VINACAS has supported members in exporting more value-added products such as roasted cashew nuts and cashew oil, thereby increasing profit margins.

The Cashew Export Promotion Council of India (CEPCI) was established by the Indian Government in 1955 with the objective of promoting cashew kernels and cashew nut shell liquid (CNSL) in India.

The Indian government alongside CEPCI have over the years undertaken several initiatives to aid the growth of the cashew industry. Such initiatives have included facilitating trade delegations, fairs, development workshops and providing trade information and statistics to its members. Setting up the council has helped in the promotion of exports of cashew kernels and cashew nut shell liquid.

Het Comité – Netherlands

The Royal Dutch Grain and Feed Trade Association (Het Comité) is a trade organization founded in 1872. The organization represents the interest of its members and affiliated members in the field of agriculture, food safety and trade policy. The organization advocates both at the national level and at the European level in close cooperation with COCERAL. To facilitate both national and international trade, Het Comité has drawn up various standard trade contracts, such as the Conditions of the Dutch Trade in Grain and Feed Materials (CNGD).

In the event of disputes based on these contracts, companies may apply to the organization for arbitration. The organization also organizes annual grain trading courses. Activities from organizations such as Het Comité has helped make the Netherlands the world’s second largest exporter of agricultural products after the United States.

Conclusion

Cocoa has traditionally been one of Ghana’s foremost commodities. However, as the global agricultural market evolves and new regulations such as the European Union Deforestation Regulation (EUDR) come into play, there is a need for a rethink of the country’s agricultural strategy. One cannot also forget about the ills of illegal mining/ “galamsey” and how it may hamper cocoa production.

The cocoa sector has over the years benefited from substantial government support and intervention. These interventions have contributed to Ghana becoming one of the leading global cocoa producers. Lessons learnt from the cocoa sector can be replicated in the cashew and soybean industry to achieve growth.

Investing in commodities such as cashew and soybean offer promising opportunities to diversify and transform Ghana’s agricultural export base. The potential benefits of growing the cashew and soybean sectors are innumerable. Implementing the above recommendations is key to increasing economic growth, job creation and a more diversified agricultural export base. This will also lead to an increase in profit margins for local producers.

An enhanced competitive cashew and soybean industry can establish Ghana as a significant player in the global market. Developing new markets for cashew and soybean will help reduce the country’s dependence on traditional commodities such as cocoa, increase our economic resilience and ensure long-term sustainable growth. It is important for all relevant stakeholders to act to maximize the benefits of these promising commodities.

>>>The writer is a lawyer at Koranteng & Koranteng Legal Advisors. Contact: [email protected]

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