Cocoa prices have extended a sensational rally, briefly setting a new record above $10,000 in a move that is likely to make chocolate treats a lot pricier for consumers.
Driving the news are a multitude of factors like production cuts, climate change and ongoing economic turmoil in Ghana (one of the leading cocoa-producing countries) which are lighting a fire underneath spot prices. Cocoa is mostly produced by small farmers in West Africa. Ghana and Ivory Coast grow about 60% of the world’s crop. Ivory Coast and Ghana have unfortunately been subject to El Niño conditions last year, which set the world’s top cocoa producers into a prolonged dry spell, impacting harvests and production.
In the past six weeks, prices of wholesale beans traded in New York have doubled, trading just above $10k per metric tonne – a 250% jump from last year.
Extreme weather patterns have hit other commodities, too. Droughts in Thailand and India are affecting rice plantations. Torrential rain in Brazil, the world’s biggest sugar exporter, has affected its exports.
However other price pressures are specific to the cocoa industry. Swollen-shoot virus and black-pod disease – both killers of cocoa trees – spread across Ghana and the Ivory Coast during heavy rainfall last year. Tropical Research Services, a research company, estimates that by the end of 2023, the swollen-shoot virus had infected around 20% of Ivory Coast’s cocoa trees.
Source: The Economist
Local Ghanaian farmers have been unable to restore old trees because it costs too much to buy pesticides; this in turn led to the spread of diseases during the last quarter of 2023.
The Ivory Coast cocoa regulator recently stopped selling contracts for cocoa exports forward sales for the 2024-25 season as production numbers drop. Reuters reports that in normal times, the heavily regulated market allows buyers to set pre-agreed prices a year in advance. However, in times of shortage, “the system breaks down” and dealers buy the beans at higher than the pre-agreed prices to secure the delivery.
To reduce the cost burden, some sweets and candy makers are replacing cocoa, cutting down on packaging and bar sizes, or using new technologies to make cocoa-free chocolates.
The question is, will chocolate remain affordable for everyone, or end up becoming a luxury item?
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