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Cocoa prices hit record highs, sending shockwaves through chocolate industry

Azra Hoosen |
9 April 2024 | 13:30 CAT
2 min read

Cocoa prices have soared to unprecedented levels, reaching a record high of over US$10,000 per tonne amidst devastating weather conditions impacting major cocoa-producing regions. This surge has sent shockwaves through the chocolate industry, with the price of chocolate, the primary byproduct of cocoa, on the rise.

While cocoa products were once reserved for special occasions, they have become more commonplace today. However, the industry faces the challenge of navigating these soaring costs, with experts predicting a gradual adjustment to avoid potential demand shocks. Factors such as consumer inflation, elevated interest rates, and sluggish global economic growth are critical considerations in managing pricing strategies during these tumultuous times.

In an interview with Radio Islam, Paul Makube, Senior Agricultural Economist at FNB Agribusiness, sheds light on the implications of the chocolate crisis.

He said that the main issue is the supply issue, and the weather has impacted the yields from the producing areas, resulting in low supply and record-high prices.

“If you look at prices of the raw materials, that has been increasing over time and reached a record high recently, so price increases have been effected time. Looking at the local market, an average chocolate slab was up 17% last year in February, indicating that prices have been relatively high, but the current increases indicate that we will have elevated prices of the by-products for the next 12 months, until the supply situation balances out with the demand,” said Makube.

It has been reported that Ivory Coast cocoa shipments over the past six months have significantly declined, down by 28% year-on-year to 1.3 million tonnes at the commodity level. Projections for Ivory Coast’s 2023/24 cocoa production, set to conclude in September 2024, are alarming, with forecasts suggesting a staggering 22% year-on-year contraction to reach an 8-year low of 1.75 million tonnes, as reported by trader Ecom Agroindustrial. Similarly, Ghana’s cocoa harvest for the 2023/24 season is anticipated to plummet to a 22-year low, ranging between 422,500 tonnes to 425,000 tonnes, primarily attributed to disease outbreaks and unfavourable weather conditions.

“Diversification is an option if you want to grow your economy, but if you have a comparative advantage in the sense that there are more suitable areas for production over the world, and they hold about 60% of the world supply, it relegates to the issue of weather and diseases affecting the place and trees dying. You need more investment in the expansion of areas and innovation around production processes to ensure sustainability in cocoa production in those areas,” he said.

Makube suggests that the current supply shortage and heightened prices in the cocoa market could prompt the acceleration of alternative product development to meet market demands. This could lead to the emergence of products that incorporate cocoa substitutes or blends tailored to suit consumer preferences. Consequently, there is a possibility of market share erosion for traditional cocoa-based products, which could have a cascading effect on producers.

“As a result, you might see a situation where a market share is actually eroded, and that will trigger down to producer level,” he said.

LISTEN to the full interview with Ml Junaid Kharsany and Paul Makube, Senior Agricultural Economist at FNB Agribusiness, here.



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