For the first time in history, cocoa prices have broken into the $12,000 mark per metric ton. It’s a record-breaking price hike that has sent waves of concern throughout the chocolate world, with fears of diminishing supplies continuing to dictate market dynamics.
The meteoric rise in the price of cocoa has been caused by a combination of factors, majorly by poor harvests in key cocoa-producing areas. West Africa alone generates more than 70 percent of the world’s cocoa production, and that zone has been facing adverse climatic conditions. Unstable rainfall patterns and dry spells for very long periods have resulted in a drastic impact on yields in countries like Ivory Coast and Ghana, the biggest producers in the world.
In addition, pests and diseases are now more rampant, thereby cutting further the output. Already strained cocoa farmers who have been subjected to a rising cost of production now find it very difficult to withstand this added burden. Consequently, the supply of cocoa beans has tightened and driven the price to an all-time high in the commodity market globally.
On the demand side, demand for cocoa remains at an all-time high, as a result of increased consumption from emerging markets and continued high demand for chocolate in the developed world. The pressure on already strained cocoa supplies has been exacerbated by the peak season for chocolate sales around the holidays.
This price hike will be expected to create a ripple effect in the chocolate industry. The main players will find their margins squeezed because the cost of raw materials shoots up. Though some will absorb the cost increases, others will increase it to consumers, meaning they will eventually pay a bit more for chocolate.
Small-scale cocoa farmers would stand to gain higher prices, but only if they could sell their crops. According to experts in the industry, these gains would likely be canceled out by low volumes of production and other higher farming costs.
Governments in cocoa-producing nations are also stepping in to address the crisis. Initiatives to improve farming practices, combat pests, and adapt to changing climate conditions are being expedited. However, these measures are unlikely to yield immediate results, leaving the market vulnerable to continued volatility.
Cocoa’s leap over $12,000 underscores the fragile supply/demand balance in the commodity market worldwide. From the farm to the manufacturer and from the manufacturer to the consumer, all are keenly watching these trends as this world grapples with fears of supply. Time alone would tell whether this price will be a new long-term or just a short-term phenomenon.
For now, chocolate lovers around the world may have to steel themselves for possible changes in their favorite treats as the ripple effects of soaring cocoa prices take hold.
