A sharp rise in the price of cocoa is set to hit chocolate lovers in their pockets as the cost of the key ingredient for making chocolate has almost doubled since the start of last year.
In New York, where the global price of cocoa is set, the benchmark ICE cocoa price hit a new all-time high of $5,874 (£4,655) a ton, closing up 7.3 per cent at $5,805. It shot past the previous record of $5,368, which was set in 1977.
Difficult growing weather in West Africa is to blame this time as it did in the 70s. Hot and dry weather in Ghana and the Ivory Coast hit growers in the region last year and is threatening the cocoa crop again this year, experts have said.
Production in both countries, which grow about 60 per cent of all cocoa, will drop this year as problems such as the old age of many trees, more bad weather and disease take a toll.
Exporters and pod counters in Ghana, the second biggest producer of cocoa told Reuters that output for the current 2023-24 season is expected to reach just 475,000-500,000 tons versus 655,000 last year. Last week, a poll forecast a global deficit of 375,000 tons in the 2023/24 growing season.
Strong demand and a worldwide drop in production are also to blame for the high prices. Global demand for chocolate rose 0.6 per cent to a record 7.1 million tons in 2015, led by a near 6 per cent increase in Asia, where Chinese and Indian consumers are developing sweet tooths.
Cocoa production fell 3.9 per cent to 4.2 million tons, estimates the International Cocoa Organization. Cocoa is usually combined with other ingredients such as milk and sugar.
The resulting squeeze on prices has meant major chocolate makers such as Mondelez, the owner of Cadbury, and Hershey warning rising prices may result in a slowdown in demand for its products from cash-strapped customers.
Hershey revealed its sales volumes slid 6.6 per cent in October-December period last year. Chief executive Michele Buck said Hershey expects higher cocoa prices will limit sales growth this year.
The world’s biggest chocolate-maker Barry Callebaut said its sales rose slightly in the three months to the end of November, as the company managed to pass on some of the impact of a surge in cocoa prices. The company, which supplies chocolate for the Magnum ice creams made by Unilever and for Nestle’s KitKat bars, said sales volumes increased by 0.4 per cent.
“With the recent weaker-than-expected cocoa bean harvest data from West Africa, the cocoa price development continues to remain uncertain. The group foresees an industry-wide impact on working capital requirements,” the company said.
Consumers have already seen prices rise. In December, consumer champions Which? said the price of some Christmas chocolate boxes has risen by at least 50 per cent. The rises come against a wider background of expensive foodstuffs. Supermarket prices may be slowing with overall food inflation recorded at 8.3 per cent in November, chocolate inflation rates was almost double at 15.3 per cent.
An added complication is the fact that in past years, high prices have seen growers clear forests and plant more trees but European Union legislation threatens to change all that. The EU, which imports more than half of the world’s cocoa beans, plans to enforce the world’s toughest deforestation rules.
The new regulations effectively bans the import of cocoa, along with livestock, soy and palm oil, produced on land that has been deforested since the end of 2020.
“We are in a very tight balance,” which will likely hold for another 18 months to three years, Paul Davis, president of the European Cocoa Association, said. The potential for prices to reach $6,000 a ton was real he warned in an interview at the Amsterdam Cocoa Week. “There is no cavalry that’s coming to the rescue.”