Cocoa prices have hit an unprecedented milestone, with futures for May delivery topping out at $10,030 per metric ton, marking the first time ever that the cost of this crucial chocolate ingredient has breached the $10,000 mark. The surge represents a nearly 138% increase within the year, signaling turbulent times ahead for chocolate manufacturers and consumers alike.
This dramatic increase in price is primarily driven by a mix of inclement weather, disease, and logistical hurdles in West Africa, the region that accounts for roughly 70% of the world’s cocoa production. The largest producers, Ivory Coast and Ghana, have faced a detrimental combination of heavy rain, dry heat, and the spread of black pod disease, striking a blow to the cocoa yield.
The result of these conditions was a stark reduction in cocoa arrivals at ports, with declines of 28% and 35%, respectively, since the start of the season compared to the previous year. As the International Cocoa Organization pointed out, “As these two leading producing countries supply about two-thirds of global cocoa beans, any change in their production tends to have a significant impact on the cocoa market.”
The repercussions of these price hikes extend well beyond the producers. Major chocolate manufacturers like Hershey have already expressed concerns, with the company’s CEO Michele Buck noting to CNBC in February, “As we look at those record cocoa prices, certainly it’s a dynamic market and those are a challenge but we have lived through market volatility and fluctuation in input costs before.”
Analysts suggest that the cocoa market may face a significant deficit this year, with an estimated shortfall of 374,000 tonnes, dwarfing the deficit of 74,000 tonnes witnessed last year. This prediction stands in stark contrast to the already high prices that have doubled since January, and could mean that chocolate, once a common indulgence, may be on its way to becoming a luxury good.
In response to escalating costs, consumers may face the unwelcome reality of “shrinkflation”—paying the same or more for chocolate products that are downsized in quantity or quality. In nominal terms, cocoa prices have surged dramatically from around $2,500 a year ago and $650 a decade ago. However, as Bloomberg’s commodity columnist Javier Blas puts it, “In real terms, adjusted by the cumulative impact of inflation, cocoa is still trading well below the peak set in the 1970s.”
Relevant articles:
– Cocoa prices hit $10,000 per metric ton for the first time ever
– Hershey ‘Shrinkflation’: Chocolate Makers’ Cost Chaos As Cocoa Reaches $10,000 Per Metric Ton – Mondelez International (NASDAQ:MDLZ), Hershey (NYSE:HSY), Benzinga, Tue, 26 Mar 2024 13:19:47 GMT
– Cocoa prices rally to reach unprecedented $10,000 per ton, Daily Sabah, Tue, 26 Mar 2024 14:11:11 GMT
– Chocolate Crisis: Surging Cocoa Prices Spurred by Margin Calls, Pound Sterling Live, Tue, 26 Mar 2024 14:36:05 GMT