IA “FACT” already reported on rising coffee prices due to climate change reducing harvests, increased production and logistics costs, and new EU regulations complicating supply. This makes coffee more expensive for consumers around the world. A similar situation developed in the cocoa market.
What’s more, this year it is cocoa that shows the greatest growth among key commodities, leaving behind even bitcoin and the US stock market. The price of the main component of chocolate has more than doubled this year and broke a new ceiling in the last month.
According to the estimates of the international financial group ING, the situation is unlikely to change in the near future: during the last marketing year, global cocoa production suffered the biggest deficit in the last six decades.
On Friday, cocoa futures for March delivery ended trading at $11,954 per metric ton. This means that since the beginning of the year prices have grown by almost 185%, according to Dow Jones. Experts note that near-term cocoa futures prices are rising, while long-term futures prices remain lower. This indicates growing anxiety about the future balance between demand and supply in the cocoa market.
It is worth noting that this year among the “soft” goods – those that are grown and not mined – investors were interested not only in cocoa and coffee, but also in frozen orange juice concentrate, which rose in price by ¾.
What do Harmattan and La Niña have to do with the cocoa crop
According to analysts, the key factor in this situation is bad weather in Ivory Coast. Record-warming oceans have exacerbated already volatile cocoa yields in West Africa. The region has been suffering due to weather disasters for the second year in a row. Wet weather in October has again damaged cocoa trees, and more recently, dry Harmattan winds, which are not typically seen in weak La Niñas, have emerged. For reference: La Niña is a decrease in the temperature of the surface waters of the Pacific Ocean near its equatorial coast, which affects the climate. Harmattan winds are dry winds that form over the Sahara and pose a threat to the “average crop” of cocoa, which is traditionally harvested in the spring.
This will only exacerbate the supply shortage in the near term. However, given the historically high prices, the question arises: will consumer demand be able to withstand such dynamics? Cocoa prices initially fell from an April peak to an October low, a normal seasonal change due to the start of the harvest. When the market received the first volumes of cocoa this year and it became clear that the harvest would be smaller than expected, prices jumped again to a new record. In December, cocoa futures prices rose by a quarter.
The International Cocoa Organization predicts that this marketing season will be big cocoa shortage – 478,000 tons. Production will decrease by 13.1%, and end-of-season stocks will decrease by 26.8%. All this is happening against the backdrop of historically high cocoa prices.
Usually, the climatic phenomenon of La Niña favors better conditions for growing cocoa. The US National Oceanic and Atmospheric Administration has said that La Niña is likely to form between November 2024 and January 2025. However, global warming and cocoa supply constraints have fueled cautious but sustained optimism in the market, which remains close to record prices.
Experts observe a trend that, despite the decrease in production due to bad weather, the demand for chocolate, cocoa and coffee remains high. People do not want to give up their favorite goodies, even if they become more expensive. This demonstrates the elasticity of demand, regardless of price.
While some experts believe that cocoa prices may decline after a sharp rise, others note that due to bad weather in West Africa and seasonal factors, prices may continue to rise. In addition, during the holiday season, when demand for chocolate increases, limited supplies put even more pressure on the market.
Evolution of cocoa prices
In recent decades, cocoa prices have fluctuated constantly due to weather, economic crises and problems in the countries where it is grown. Now the situation on the cocoa market is very complex and special.
In the 1990s, the main countries of cocoa origin – Côte d’Ivoire and Ghana – faced wars and economic problems. This reduced production and cocoa prices rose. The situation stabilized somewhat in the early 2000s, but the global financial crisis in 2008 reduced demand for chocolate and prices fell.
In the 2010s, the market changed due to good harvests and increased acreage. This reduced prices slightly, but political instability in producing countries still posed problems. Meanwhile, demand for chocolate was growing, especially in the Asian region.
Currently, cocoa prices have reached record levels. In addition to weather and climatic causes – droughts, heavy rains that damage the crop, and diseases that affect cocoa trees – the harmful effects of the pandemic have become apparent. COVID-19 disrupted logistics and made fertilizers more expensive, which also pushed up prices.
The demand for chocolate is constantly increasing, but producers do not have time to grow enough cocoa due to climate problems and lack of resources. If the situation does not improve, chocolate may become more expensive. To avoid this, governments need to address climate change, improve working conditions in producing countries and use new technologies to grow cocoa.
Technological innovations and industry prospects
Changes in cocoa prices have a strong impact on countries that depend on cocoa sales, such as Côte d’Ivoire, Ghana and Brazil. For them, cocoa is an important source of income and work for millions of people. If prices rise, the governments of these countries receive more revenue that can be spent on supporting the social sphere – roads, schools and other important needs. But when prices fall, farmers become poorer and life in rural areas becomes more difficult. It becomes especially difficult during climate change. Droughts, erratic rains and diseases affecting cocoa trees reduce yields. Because of this, countries are forced to look for new ways of growing to maintain their incomes and protect farmers.
Modern technologies and new approaches help farmers to grow cocoa in the conditions of climate change. For example, in Ghana and Côte d’Ivoire, scientists have developed cocoa varieties that are better able to withstand drought and pest attacks. Thanks to this, the harvest remains stable, even if the weather conditions deteriorate. Digital technologies also help farmers – through mobile applications, they receive weather forecasts, advice on crop care and methods of pest control. And drones and satellites allow you to monitor the condition of the fields and quickly respond to problems.
Another approach is agroforestry – growing cocoa together with trees that create shade, conserve moisture and protect the land from depletion. This helps farmers grow cocoa even in difficult conditions.
In addition to technology, sustainable production initiatives are important. Thus, in Côte d’Ivoire and Ghana, a surcharge was introduced to the price of cocoa so that farmers could earn more. Also, many producers receive certificates that confirm that their cocoa is grown ecologically and without harm to people and nature.
Big companies like Mars and Nestlé also help farmers by funding training, introducing new technologies and encouraging farmers to protect forests. In addition, farmers can receive additional income for reducing carbon emissions or preserving ecosystems.
These changes affect the entire cocoa market. At first, due to new technologies, prices may rise slightly, but in the long run, this will help stabilize production and make cocoa of higher quality. Consumers are also more interested in environmentally friendly products, which forces manufacturers to switch to sustainable methods of operation.
Cocoa prices are likely to remain high or even increase in the coming years. This is due to both climate change and the increase in demand for it in the world. To make a difference, consumers can support environmentally responsible brands. For example, by buying products with Fair Trade or Rainforest Alliance certificates, people help farmers receive fair wages and contribute to nature conservation.
Businesses can also help by implementing green technologies: saving energy, recycling waste or using resources more efficiently. Such approaches not only reduce costs, but also improve the reputation of companies, which is important for consumers who increasingly value caring for the environment.
In addition, supporting local farmers and producers can reduce dependence on imports and preserve regional traditions. For example, buying local sweets or reducing food waste can help stabilize the cocoa market.
How consumers react to rising cocoa and chocolate prices
When cocoa and chocolate prices rise, people begin to change their habits. For many, chocolate becomes too expensive, so they either buy it less often or choose cheaper options. For example, instead of high-quality chocolate, they buy one with less cocoa or cheap additives such as palm oil. Others try to find discounts or buy small packages to save a little.
For those who consider chocolate an unaffordable delicacy, there are alternatives. People are switching to cocoa-free sweets. Some choose healthy desserts with honey, nuts or dried fruits. There is also carob – a natural product that tastes like chocolate, but costs less. New “vegetable chocolate” products are also becoming popular, because they are ecological and more affordable.
Due to high prices, the demand for chocolate may decrease, especially among people with middle and low income. This forces manufacturers to come up with new, cheaper products or look for alternatives to retain customers. Ecological and affordable sweets are becoming more and more popular.
Tetyana Viktorova
