In the 1994 Robert Zemeckis’ film Forrest Gump, lead character Forrest Gump (played by Tom Hanks) famously says “My mom always said life was like a box of chocolates. You never know what you’re gonna get.”
Well, for many chocolate lovers, that “box of chocolates” is about to become more expensive. Quite a bid more expensive.
Droughts in West Africa, which is the main global supplier of cocoa beans, have led to a significant increase in prices, reaching a record high.
West Africa is the primary producer of cocoa beans worldwide. However, due to droughts, there have been limited harvests, resulting in a record-breaking increase in cocoa bean prices.
March delivery cocoa futures on the Intercontinental Exchange (ICE) in New York experienced a momentary surge, surpassing $6,000 per metric ton during intraday trading on Friday. However, they subsequently decreased and settled at approximately $5,880 per ton, which is significantly higher than the previous record of $5,379 set in 1977. Since the beginning of last year, cocoa prices have approximately doubled.
The sudden price spike is being linked to the inadequate harvests in Cote d’Ivoire and Ghana, the two nations accountable for 66% of global cocoa production. Both countries have been grappling with adverse climate fluctuations and outbreaks of cocoa pod diseases for several months.
Cocoa shipments from Cote d’Ivoire decreased by around 39% compared to the previous year between October 2023 and February 2024, totaling 1.04 million metric tons, as reported by Euronews. Likewise, exports from Ghana experienced a significant decline of approximately 35% to 341,000 metric tons from September 2023 to January 2024. According to a recent cocoa poll conducted by Reuters, the global cocoa bean deficit is projected to reach 375,000 tons in the current agricultural season.
Bean prices are projected to rise continuously as industry experts highlight the persistent threat to global supply from the weather event El Nino. This phenomenon resulted in droughts in West Africa from July to September 2023 and is predicted to persist until at least April.
Chocolate producers have cautioned that increasing cocoa bean expenses could lead them to transfer these increases to customers. During a recent earnings call, Michele Buck, the CEO of Hershey, a prominent American confectionery company, stated that she anticipates a restriction in earnings growth for 2024 due to unprecedented cocoa prices, resulting in price hikes for their products.
Buck affirmed that they would employ all available methods, including pricing, to oversee the business. Mondelez, the company that owns Cadbury, similarly cautioned about increasing prices as a final option to handle expenses. Paul Davis, the European Cocoa Association’s (ECA) leader, recently cautioned that the global cocoa market will probably stay constrained for an additional 18 months to three years.
“We are in a very tight balance. There is no cavalry that’s coming to the rescue,” ECA chief added.