Cocoa Prices Shoot Up Almost 40%

Spend Matters welcomes this guest post from Corrina Hutchings, senior market analyst at Mintec. 

Chocolate is generally a hot topic, and with only a couple of months between Christmas, Valentine’s Day and Easter, homes across the U.S. are likely to have stockpiles. Since the start of 2018, the price of cocoa beans has been increasing rapidly and does not look like it will settle soon.

Prices on the ICE NY US are up 39% since the start of 2018 and 25% year-over-year, close to those prices seen throughout 2015/2016, when the severe Harmattan winds and dry weather caused by El Nino saw production and quality levels fall.

To understand fully the recent price rises, it is useful to look back at 2016/2017, an abundant year in cocoa production. The season saw the Ivory Coast production reaching just over 2 million tonnes, up 27% year-over-year and the highest crop on record, with Ghana also showing a 22% increase in production to 950,000 tons.

This was due to a variety of factors, one of which was the chocolate manufactures investing in new schemes across the main growing regions in the Ivory Coast and Ghana. This included providing fertilizers and introducing hardier varieties of the cocoa plants to growers with the aim of increasing yields and decrease diseasing, consequently reducing prices. On the outside, this may seem like a positive move for the farmers, however, combined with ideal weather conditions, the year was almost too good for the farmers. These saw the average prices in 2017 drop 29% when compared with the average price over 2016, meaning producers did not get the return they needed.

To bring the cocoa prices back up and support their local farmers, the Ivory Coast Coffee and Cocoa Council (CCC) announced at the start of March that it will be suspending the programmes and help received from the large chocolate manufactures for the 2017/2018 season to ease the global oversupply. As a result, this saw prices rise 14% in March alone.

However, prices had already started to rise sharply at the start of 2018 due to a variety of factors. Production was already reported as reduced, with estimates for 2017/2018 from Ghana reduced by 28% year-over-year. February reports did suggest, however, that the Ivory Coast was only expecting a slight decrease to 2 million tons from 2.02 million tons in the previous season, but this was prior to the CCC announcement in March.

Some of the issues so far this season include an increased intensity of both the Ivory Coast’s and Ghana’s seasonal heat waves, which resulted in a decrease of the quality of the beans, meaning buyers will need to purchase more to produce the quantity of butter they require. January also saw reports from the CCC that it will uproot 300,000 hectares of CSSV infected trees throughout the Ivory Coast. The cacoa swollen shoot virus rapidly decreases the yield in the first year of infection, ultimately killing off the tree.

With so many factors affecting the cocoa market this year it is definitely one to watch. However, whether consumers will feel the increase is hard to say. Could we see manufacturers absorbing the cost increases with shrinkflation? We will have to keep an eye out on packet sizes to know the answer.

Share on Procurious

Discuss this:

Your email address will not be published. Required fields are marked *