The cost of cocoa, a crucial raw material for chocolate production, surged to its highest level in over 12 years in New York on Tuesday, July 18.
This rise in prices comes shortly after cocoa reached its highest point in 46 years in London. The situation has put traders and chocolate manufacturers in a challenging position due to limited supplies.
During the trading session, the benchmark cocoa contract at the Intercontinental Exchange in New York reached $3,429 per metric tonne, the highest level since March 2011. It closed at $3,407, representing a 1.4% increase.
Cocoa has become one of the most sought-after agricultural commodities, primarily because of an unusual decline in production in the western part of Africa. This region is a major supplier of raw cocoa to chocolate makers worldwide.
Moreover, the prospect of potentially adverse weather conditions in the future is also impacting the market.
Analysts have expressed concerns about the areas of Ghana, Ivory Coast, Nigeria, and Cameroon, where drier-than-normal weather is anticipated for the coming months due to the developing El Nino pattern. These factors have combined to drive cocoa prices to their current soaring levels.
“Cocoa production is usually weaker in an El Nino year. We don’t know how strong this current El Nino will be, but forecasters say it will probably be strong,” said Rabobank cocoa analyst Paul Joules.
“The 2023/24 mid crop could be affected, as well as the 2024/25 main crop,” he added, referring to the two annual cocoa crops African countries harvest.
On Monday, exporters estimated that the volume of cocoa arriving at ports in Ivory Coast, the world’s leading cocoa producer, has decreased by 4% compared to the previous year, indicating a smaller production for the season.
In London, cocoa futures settled with an increase of 18 pounds, equivalent to 0.7%, reaching 2,532 pounds per metric tonne.
As for other commodities, raw sugar settled up by 0.3% at 23.86 cents per pound, remaining within a recent narrow range and below the 11-year peak above 27 cents reached in late April.
Arabica coffee experienced a rise of 0.3%, settling at $1.563 per pound, while robusta coffee, on the other hand, settled down by $20, or 0.8%, at $2,532 per metric tonne.