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Cocoa prices have hit a record high and continue to rise. How is the industry reacting? What does the future hold for this important commodity that is in demand all over the world?
Cocoa prices hit a record high in December, reaching $10.32 per kilogram. According to YCharts.com data, the price did not stop there and continued to rise, reaching $10.75 per kilogram on 31 January.
The sharp climb sent shockwaves through the food and beverage industry, triggering fears that prices could spiral out of control. ‘This was the biggest increase in more than six decades,’ said Nidhi Jain, Commodity Specialist at WNS Procurement, foodnavigator.com reported.
Why are cocoa prices rising?
The sharp increase in cocoa prices is fuelled by concerns about bad weather in West Africa, a major supplier to the European Union (EU) and a key growing region. According to the World Bank, global cocoa production is forecast to fall by 14% in 2023-24, from 4.9 million tonnes in 2022-23 to 4.2 million tonnes.
‘The decline is largely due to lower production in Côte d’Ivoire and Ghana, which together produce around 60 per cent of the world’s cocoa,’ said John Baffes, Senior Agricultural Economist at Development Economics Prospects Group. This was exacerbated by strong seasonal demand. ‘The International Cocoa Organisation (ICCO) reported a production deficit of 478,000 mmt for the 2023-24 season. It also said that end-of-season stocks are estimated at 1.3 mmt, a 46-year low,’ Jan said.
On the other hand, there is some potentially positive news. ‘Supply conditions are expected to improve in the 2024-25 season, particularly in Côte d’Ivoire, where favourable weather conditions in key growing regions could boost production by up to 17%,’ said Baffes of the Development Economics Prospects Group. This should lead to prices falling by around 13% in 2025 and a further 2% in 2026 as additional supplies enter the market, Baffes said.
However, the possibility of a return of unfavourable weather conditions in West Africa poses a significant risk to supplies and prices. Although a favourable period is expected, prices will remain high in the short term.
