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What is driving cocoa’s sweet run?

Global warming, rising input costs driving price surge

Published: Sun 31 Mar 2024, 2:02 PM

Updated: Sun 31 Mar 2024, 2:02 PM

Farmers harvest cocoa pods on a farm in Asikasu, a town in Eastern Region of Ghana. — AFP

Farmers harvest cocoa pods on a farm in Asikasu, a town in Eastern Region of Ghana. — AFP

As gold, oil and silver enjoy a record run on the commodities market, another not-so well-known commodity — cocoa — is having a sweetened run as well. Over the past year, New York cocoa prices have soared by more than 200 per cent, including a notable surge of 97 per cent just this year. The London-based cocoa future has rallied even more robustly, with the May 2024 futures contract up 105 per cent year-to-date.

“In the realm of food commodities, witnessing a sharp increase in prices is a rare event. Yet, this is precisely what’s unfolding in the cocoa market,” Ole Hansen, Head of Commodities Strategy, Saxo Bank, said in a report.


This significant uptick can be traced to a combination of factors, especially in West Africa, and global warming is a major contributor to the price trend. “The Ivory Coast and Ghana are recognised as the leading global producers of cocoa beans. The past year has introduced challenging weather conditions in these countries, particularly intense heat, negatively impacting cocoa production,” the report said.

Furthermore, the escalating costs of pesticides and fertilisers have imposed financial strains on farmers, making it harder for them to procure these vital components for crop maintenance. Pests that have targeted cocoa plants have further diminished yields.


Ole Hansen - Head of Commodities Strategy - Saxo Bank

Ole Hansen - Head of Commodities Strategy - Saxo Bank

As a result, the prevailing circumstances pose an exciting scenario for traders and investors alike. With cocoa production witnessing a downturn—evidenced by a 40 per cent decrease in arrivals at Ivory Coast ports compared to the previous season — the supply chain has felt the pinch. This reduction in supply occurs as a significant portion of the cocoa is pre-sold to companies and manufacturers of cocoa and chocolate products. “Faced with the challenge of fulfilling these commitments, these entities are compelled to look for alternative sources. This scramble for cocoa has led to a squeeze in the futures market for cocoa prices,” the report said.

Consumer impact of rising cocoa prices

From the consumer’s standpoint, the immediate effects of the spike in cocoa prices might not be directly noticeable. “Typically, it can take six to 12 months for such price hikes to be reflected in the retail pricing of products. Nevertheless, consumers should brace for an uptick in chocolate bar prices in the forthcoming period,” Hansen said.

Additionally, the trend of shrinkflation is likely to become more pronounced. This practice involves reducing the size of chocolate bars or the quantity of chocolates in a package while keeping prices constant. “Consequently, while the price tags of chocolate items might not rise dramatically, the quantity offered for the same price will decrease,” Hansen added.



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