Global Cocoa Prices Soar Amid Supply Concerns

Cocoa prices are surging due to growing concerns about a potential supply shortage. Over the past year, the price per ton of cocoa has tripled, skyrocketing from US$2,000 to over US$6,000.

Cocoa futures hit a record high of US$6,553/ t this week, marking a 4.6% weekly increase, the largest since 1999, as reported by Bloomberg. Industry analysts reported a 40% surge in cocoa prices, as in 2023, the price stood at US$2,600/t. Ole Hansen, Chief Commodity Strategy Officer, Saxo Bank AS, attributes the price hike to speculations about reduced product availability for meeting pre-existing sales commitments.

Several factors contribute to the global rise in cocoa prices. Among them, the most concerning is perhaps the uncertainty surrounding the production in West Africa, where adverse weather conditions have significantly damaged cocoa crop yields in countries like Ivory Coast and Ghana. These nations play a crucial role in the global cocoa supply chain, providing 40% of the world's cocoa consumption. Moreover, West Africa is the source of approximately 75% of the world’s cocoa production. 

Crop damage has been attributed to the El Niño phenomenon, resulting in drier weather conditions. Additionally, climate change-induced hotter temperatures and shifts in rainfall patterns are also impacting harvests. “Traders are worried about another short production year, and these feelings have been worsened by El Niño, which is threatening West Africa crops with hot and dry weather,” stated Jack Scoville, Analyst, Price Futures Group. 

According to the US National Oceanic and Atmospheric Administration (NOAA), optimal cocoa cultivation zones will shift to higher altitudes by the year 2050. This shift may compel countries like Ghana to use currently protected lands for cocoa production. However, this may prove counterproductive environmentally speaking and in terms of trade, especially as the European Union, the world's main cocoa importer, implemented a law last year prohibiting the import of products contributing to deforestation, including cocoa and coffee, as reported by MBN. 

In addition to rising cocoa prices, the global chocolate sector continues to face challenges stemming from the pandemic. The restoration of labor and the acquisition of key inputs, such as fertilizers, have experienced significant delays. Moreover, the transport of cocoa to major consumer markets, such as the United States and Europe, continues to be hindered by delays.

Sugar and wheat, two essential raw materials in chocolate production, are also experiencing constant price increases. European Commission data shows a year-on-year increase of 78.5% for sugar, and the Food and Agriculture Organization (FAO) predicts a moderate contraction in global wheat planting in 2024, with a price increase of up to 6%.

At a domestic scale, despite challenging international conditions for the cocoa industry, the Mexican chocolate sector foresees a 10% year-on-year growth in sales for 2024, emphasized Paolo Quadrini, General Director, National Association of Chocolate, Candy, and Similar Products (ASCHOCO). Quadrini explained that, to mitigate the economic impact on Mexican consumers, chocolate makers will introduce smaller versions of sweets to retail stores. Additionally, the industry aims to boost consumption through innovations like organic and lower sugar content presentations, as well as incorporating unique ingredients like chili or grasshoppers into existing products.