Cocoa prices have been shattering records as production in Africa suffers — and consumers are set to have to pay much more for chocolate.
Easter, one of the biggest days for chocolate, is fast approaching, and consumers could see some higher prices, but the worst of the cocoa shortage will likely be reflected down the road. Prices have been soaring for months as countries such as Ghana and the Ivory Coast face major problems with production.
Cocoa futures for May delivery crossed $10,080 per metric ton on Tuesday before paring back some of those gains. Global cocoa prices have ballooned a whopping 245% since this time last year and are up an astonishing 128% since just the start of 2024.
Steve Wateridge, the head of research at Tropical Research Services, said that cocoa prices, which had been fairly stable over the previous decade, have soared because of supply problems caused by aging tree stock and disease.
The Ivory Coast and Ghana account for over 65% of world cocoa production, but production in the region has been threatened. Atop the list of problems are an aging stock of cocoa trees and the spread of a disease known as swollen shoot virus.
Additionally, abnormally high temperatures in the Pacific due to the phenomenon known as El Nino have marginally hurt the harvest.
In order for prices to stabilize and come down, Wateridge told the Washington Examiner, there will have first to be “massive demand destruction,” which will only come when prices rise to a certain breaking point.
But chocolate prices have not yet been affected. That is in part because most major companies, such as Hershey, Nestle, and Mars, have successfully hedged the risk of higher cocoa prices.
“So, at the moment, the candy bars in the shop are reflecting last year’s prices,” he said. “So, we’d need to see further price increases before demand gets hit badly.”
Additionally, higher prices should eventually lead to more fertilizer at production facilities, better farm care, and improved cocoa yields. Still, the Ivory Coast and Ghana have a central marketing board that sells forward “and basically fixes the price” at the beginning of each cocoa season in October, Wateridge said.
“So, the price increases you’ve seen since October haven’t been passed on to the farmers in Ivory Coast and Ghana,” he said.
Prices could rise, though, before Christmastime.
Major chocolate producers are preparing to handle dramatically higher prices.
Hershey CEO Michele Buck recently said that “given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business.”
Rabobank cocoa analyst Paul Joules pointed out to Reuters that the surge in cocoa prices has been going on for some time and that if it persists, the situation will become much trickier.
“Last year, chocolate companies were fairly well-hedged,” he said. “They had some stockpiled cheap cocoa as well, but this rally has been going on for well over a year, so a lot of these companies are beginning to be fully exposed to these higher cocoa prices.”
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Wateridge, who has been in the cocoa space for some four decades, said one would have to go back to the 1970s to find a situation similar to today’s. At that time, prices went to a record high of about $5,000 per ton before stabilizing — a record that was only just broken this year as prices jumped upward.
When prices reached $5,000 back in the 1970s, it decimated demand and basically stimulated production, which led to oversupply years later, Wateridge explained. The question now is how high prices now have to go to hit that same demand wall.
