The cocoa futures price for May 2024 delivery surged to an all-time intraday high of $10,080 per metric tonne Tuesday 26th March 2024
Cocoa prices have soared, hitting unprecedented highs. This dramatic increase has profound consequences for both consumers and the chocolate industry.
Chocolate enthusiasts might have to prepare for increased prices or changes in product sizes (or both), due to the persistent challenges in the cocoa market.
Historic Supply Deficit
The world is experiencing the most significant cocoa supply shortfall in over six decades. In West Africa, a key region for cocoa production, farmers are struggling with adverse weather conditions, diseases, and aging trees. These persistent problems have resulted in a critical reduction of cocoa supplies, and there appear to be no simple resolutions on the horizon.
Price Volatility
Recently, cocoa futures contracts for May 2024 delivery reached a record intraday peak of $10,080 per metric tonne. In the past year, cocoa prices have more than tripled, with a 129% surge in 2024 alone. Major chocolate producers have implemented hedging strategies to cope with price volatility and prevent the direct transfer of increased costs to consumers.
Impact on Consumers
Large chocolate companies, well-hedged last year, are reaching the limit of cost absorption. As cocoa prices rise, consumers might begin to feel the impact. The National Confectioners Association is collaborating with retailers to reduce costs and maintain chocolate affordability. Nonetheless, there’s a finite extent to which the impact of escalating cocoa prices can be lessened.
Future Outlook
The International Cocoa Organization predicts a supply shortfall of 374,000 tonnes for the 2023/2024 season, marking a substantial rise from the previous season’s 74,000-ton deficit. Experts caution that ‘the worst is yet to come,’ suggesting that cocoa prices may stay high due to persistent market challenges lacking swift solutions.
Possible Consumer Impact
With the ongoing surge in cocoa prices, consumers may encounter higher costs or “shrinkflation,” resulting in smaller chocolate bars. Manufacturers might alter their recipes to include less cocoa. Dark chocolate, known for its high cocoa content, could be most affected.
In summary, a mix of supply shortages, fluctuating prices, and industry limitations is pushing cocoa prices to record levels.