Ghana and Ivory Coast Cocoa Prices Surge to Record Highs

Global cocoa prices have surged to unprecedented levels, driven by poor harvests in West Africa, the world’s largest cocoa-producing region. The key ingredient for chocolate making has doubled in cost since the beginning of last year, reaching a historic high of $9010.59 per ton on the New York commodities market.

Analysts attribute this surge to adverse weather conditions, particularly the El Niño phenomenon, which has caused drier weather in Ghana and Ivory Coast, leading to smaller cocoa crops. The intensity of seasonal Harmattan winds in West Africa is exacerbating the situation by drying out cocoa fields and further reducing yields.

The Ivory Coast, the world’s largest cocoa producer, has seen a significant decline in cocoa shipments, down 36% year-on-year, prompting its cocoa regulator to halt forward sales until a clearer picture of expected production emerges. Total precipitation in West Africa has been more than double the 30-year average, contributing to unfavourable growing conditions and crop diseases.

This supply shortfall is fuelling fears of wider deficits in the cocoa market, with traders betting on continued production constraints and soaring prices. Large trading volumes indicate increased speculation, putting further upward pressure on prices.

The surge in cocoa prices is already impacting chocolate manufacturers, with companies like Hershey and Mondelez reporting declines in sales volumes. Rising raw material prices are expected to limit earnings growth for chocolate makers, who may have no choice but to pass on the increased costs to consumers.

The industry is facing challenges on multiple fronts, including adverse weather, disease outbreaks, and geopolitical disruptions. Despite historically resilient demand for chocolate, rising prices could eventually lead to demand destruction, as evidenced by declining volume sales amid price hikes.

Looking ahead, cocoa prices are expected to remain high until a new African crop comes to market later this year. However, uncertainties persist, with concerns about the potential for another poor harvest next season. The situation underscores the vulnerability of the cocoa supply chain and the challenges faced by both producers and consumers in navigating a volatile market.