The world is bracing itself for a potential increase in chocolate prices due to cocoa crop shortage in the leading cocoa-producing regions of Ghana and Ivory Coast. These two countries collectively supply two-thirds of the world’s cocoa, and their struggles with adverse weather conditions and crop diseases have sent cocoa prices surging by approximately 47% over the past year.
The cocoa market is no stranger to fluctuations, but the combination of recent challenges has raised alarm bells in the sector. Cocoa prices have been on a relentless climb, largely driven by concerns over adverse weather conditions and crop diseases in Ivory Coast and Ghana. These issues have significantly impacted cocoa production, sending shockwaves throughout the industry.
The recent surge in cocoa prices has raised concerns among major chocolate manufacturers such as Hershey Co. and Lindt & Spruengli AG. They have cautioned about potential price hikes that could potentially affect demand in both Europe and the crucial growth market of Asia. This situation has caused ripples across the cocoa supply chain.
“The current situation is looking relatively dire unless there is a dramatic improvement in the outlook. Further price increases could weigh on consumption,” noted Darren Stetzel, Vice President of Soft Commodities for Asia at broker StoneX.
The cocoa crisis is not solely the result of one factor but rather a confluence of challenges. Excessive rainfall, pest infestations, and crop diseases have wreaked havoc on West African cocoa crops. The key question revolves around the size of the two annual cocoa harvests in Ghana and Ivory Coast, with Ivory Coast initially forecasting a nearly 20% decrease in output for the main-crop season.
Rabobank and Marex analysts have projected a drop in West African cocoa output for the 2023-24 season, with Marex even anticipating a global deficit of 279,000 tons, surpassing the combined shortfalls of the previous two seasons. This poses a significant threat to the livelihoods of African cocoa farmers, many of whom are already living below the poverty line.
Agricultural inputs like fertilizers and pesticides have also become scarcer and more expensive for these farmers, hampering efforts to rejuvenate or treat damaged cocoa trees and address the swollen-shoot disease, which threatens Ivory Coast’s cocoa output, affecting approximately 20% of the nation’s crop.
Despite the jitters, Ghana has taken proactive steps to address the crisis. The country has increased cocoa farmer pay by over 60% to curb smuggling into Ivory Coast and encourage investment. This move may lead to increased cocoa production in Ghana, but challenges remain.
One such challenge is the aging cocoa trees in Ghana, which could contribute to a declining production trend. The cocoa market’s tight supply chain has also resulted in reduced processing of cocoa beans into confectionery products globally. High cocoa prices are starting to impact demand in Asia, with Swiss grinder Barry Callebaut AG reporting lower sales in July.