In less than three months, cocoa prices on global markets have surged, doubling in value and causing significant cost increases for consumers.
This surge has led chocolate manufacturers to seek out additional supply sources.
The most active contract in New York reached a record high of $8,493 per metric ton, marking a 5.9% increase.
In West Africa, the primary cocoa-growing region, crops have been adversely affected by diseases and various extreme weather events. Consequently, the world is heading towards its third consecutive supply deficit.
Processing plants in West Africa are already experiencing shutdowns, while impending environmental regulations for European importers are further complicating the sourcing of beans.
“There is still no visibility on the next crop, and the challenge for Ivory Coast and Ghana is no one knows how they can address their production issues,” said Fuad Mohammed Abubakar, head of Ghana Cocoa Marketing Company UK.
“There is no supply rescue in the next few months,” he said.
The surge in cocoa prices is gaining momentum just before Easter, a significant chocolate-consuming holiday in Europe and the US.
Although manufacturers typically purchase cocoa beans months in advance, the rapid increase in prices is starting to have an impact. Some chocolate bars are becoming more expensive, smaller in size, or incorporating additional flavors to mitigate the cost increase.
“There are lots of players who have already announced price increases. We are also part of that group,” Martin Hug, chief financial officer at chocolate maker Lindt & Spruengli, said on an earnings call earlier this month.
“It is very difficult to predict at the moment what will happen with the cocoa market. But I think we have controlled it as well as we can,” he said.
Historically, cocoa prices have been upheld due to constraints on expanding acreage for cocoa tree cultivation, particularly in light of EU regulations prohibiting the trade of products associated with deforestation.
In reaction to the surge in global prices, other countries such as Ecuador and Brazil are increasing cocoa production. However, it takes a minimum of three years for trees to yield pods. Despite recent price increases, demand for chocolate products has remained resilient.