What cocoa price hike means for global markets

Côte d’Ivoire is gearing up to increase cocoa prices for its upcoming harvest by up to 23%, following the significant nearly 45% increase by Ghana. The goal is to address harvest shortfalls, enhance farmers' incomes, and combat bean smuggling. Tedd George, Chief Narrative Officer at Kleos Advisory, shared insights on how this move will impact global markets. The cocoa industry is closely watching the cocoa price adjustments by Côte d’Ivoire and Ghana, the top producers who collectively account for about 60% of the world's cocoa supply. Both countries raised prices for the last season's light crop, with Ghana experiencing a 58% hike, and Côte d’Ivoire increasing by 50%. While Ghana is set to further increase prices by 45% this season, Côte d’Ivoire's plans are yet to be officially unveiled. It is anticipated that cocoa prices could surge by up to 60% in Côte d’Ivoire, considering the current prices are still more than double compared to the previous year. Despite the price hikes, farmers in both countries are likely to receive less than the international market rates due to the cocoa supply chain dynamics. The farm gate prices are significantly lower than the global prices, and analysts suggest that farmers may still fall short of receiving competitive rates. This poses a challenge as the cocoa sector seeks to balance fair farmer compensation with market demands. A persistent issue affecting both nations is cocoa smuggling across borders. In Côte d’Ivoire alone, an estimated 150,000 to 200,000 tonnes of beans were lost to smuggling in the recent season. Smuggling thrives when price differentials between neighboring countries create incentives for illicit trade. Aligning prices and enhancing border controls are crucial steps to deter smuggling and stabilize the cocoa market. Looking ahead to the next cocoa season, output forecasts indicate a modest rebound in production but not to previous levels. Ghana predicts around 650,000 tons, an improvement from the previous season but still below historical averages. Côte d’Ivoire is also expected to witness a slight recovery but is unlikely to surpass 2 million tons. These production levels will influence international cocoa prices, which have remained high compared to the previous year. Furthermore, there is a growing interest in South American cocoa producers as potential suppliers to the global market. Countries like Ecuador, Peru, and Brazil are ramping up production, challenging Africa's dominance in cocoa production. While Latin American producers are gaining ground, it will take time before they can significantly impact the global cocoa market. In conclusion, the impending cocoa price hikes by Côte d’Ivoire and Ghana are set to reshape the dynamics of the global cocoa market. The industry awaits further clarity on Côte d’Ivoire's pricing strategy and closely monitors production trends in both leading cocoa-producing regions.