Cocoa prices continue to soar, as weather and crop deficits hit global industry
Cocoa farming in Asia. PIc: Shutterstock
Cocoa prices have reportedly risen to their highest recorded level on the New York stock exchange since the 1970s, standing at $5,874 a tonne (£4,655), yesterday, causing notable industry concern, writes Neill Barston.
As major manufacturers, including Hershey, Mondelez and Lindt have noted, the cost of the major ingredient has doubled within the space of a year, as the industry remains hit by a shortage of supplies following two years of weather-impacted crops from tropical El Nino conditions.
Farmers in core cocoa supplying countries of Ghana and Ivory Coast have also been affected by significantly higher prices for fertilisers, which were prohibitively expensive for many agricultural workers last year. This in turn has hit crop yields, as well as the issue of crop diseases also affecting the quality of harvests for key communities in the industry.
In terms of crop deficits, International Cocoa Organisation has estimated last year that the global cocoa stock shortfall is around 99,000 tonnes, against an overall annual production volume of around five million tonnes delivered last year, according to Statista research group.
Another major financial factor that has been highlighted to Confectionery Production, is on stock exchange results that have reported record highs do not typically account for inflation, so the present high of $5,874 compared against the last historic price peak of cocoa seen in 1977, at $5,700, is, in real terms in 2024, worth around $28,000 today.
Pressure on retail prices
Consumers have already felt the economic strain of confectionery price rises within the past year, with the Which report, among others, reporting a 50% increase in its chocolate confectionery ranges in the run-up to Christmas, and the latest surge in prices seen this week may potentially impact on the traditionally strong Valentine’s gifting market.
As for major chocolate companies, Hershey has just released its latest financial figures, which show that while overall, the company made sales gains in 2023, its figures fell for the final quarter, with operating profits decreasing $464 in the last four months of the year.
Notably, as we recently reported, in the UK, Karen Betts, chief executive of the Food and Drink Federation recently warned that ingredients price rises, including those for cocoa, were a particular concern for the sector, which is already grappling with the fallout of higher energy prices over the past two years, as the cost of living crisis continues to impact.
Speaking to Confectionery Production, Adrian Ling, CEO of Plamil Foods, explained that the surge in prices over the past two years had meant that the company had been forced to put up its prices to customers, along with many others within the sector.
He said: “The current situation is highly volatile with numerous factors involved, culminating in increased prices of the cocoa bean and onward cocoa ingredients used to manufacture chocolate. On LinkedIn, I nearly bet I’d eat my hat with regard to speculating how fast the prices were rising this week… thank god I didn’t, the next day it reached that level.
“Towards the end of 2023, with an easing of general inflationary pressures, ingredient buyers of chocolate were tending to hope that the forecast in chocolate prices were short term. At that time, we were encouraging customers to contract long into 2024, with even then, what seemed to be challenging pricing. Those that went short in the hope of a soon to happen easing are seeing a considerable firming of pricing wholly due to the current cocoa situation.”