Spend Matters welcomes this guest article by Avneet K Deol of Mintec.
After widespread reports earlier in 2014 about concerns of a continuing shortfall in cocoa supply, we have reviewed production for the last season and will provide an insight into how this has affected price movements in the cocoa market.
In contrast to forecasts at the start of 2014, cocoa production actually rose in summer 2014 leading to a sustained fall in prices, down 13% since September 2014. Global production last season reached a record 4.37m tonnes, up 11% year-over-year, with cocoa grindings expected to increase 3% y-o-y to 4.27m tonnes.
In 2014, news that the world may run out of chocolate was fuelled by both the breakout of the deadly Ebola virus and the effect this had on shipments from Africa’s Ivory Coast; the world’s largest cocoa producer (and by far the largest exporter to the US), which was at the center of the outbreak. Transportation and travel in a number of different regions in Africa was suspended to prevent the disease from spreading, leading to concerns over the global availability of cocoa. So far, this fear appears to have been nothing more than speculation.
The US is the world’s largest single chocolate market by value, but consumption here has fallen since 2012, partly in response to the increase in cocoa prices, which has pushed some manufacturers into reviewing their pricing. This drop in consumption has been reflected in other markets, with EU cocoa grindings in Q4 2014 down 7% y-o-y and grindings in the emerging Asian marketscut sharply, down 18% y-o-y.
Prices for cocoa beans eased over the last 6 months due, in part, to this lower demand for chocolate and large supplies. This season’s arrival of cocoa beans to ports in Ivory Coast reached 1,093,000 tonnes by Feb. 1, down by insignificant volumefrom 1,097,000 tonnes at this time last season.
With the recent concerns over cocoa supplies, and the US economy generally expected to continue to recover in 2015, leading to a likely increase in chocolate consumption, there may be something to worry about in the cocoa market after all! Although, most likely, the world will not run out of chocolate as we expected last season.