Cocoa prices rally on slowing West Africa exports

The cocoa industry is facing uncertainty in 2025 as prices remain at eye-wateringly high levels. In 2024, cocoa prices surged to record highs due to concerns over poor weather conditions in West Africa, leading to bean volumes at export facilities falling below the five-year average. This made cocoa one of the best-performing commodities of the year. As a result, chocolate makers are exploring alternatives like lab-grown cocoa and seeking approval to purchase significant amounts of cocoa beans on the ICE Futures Exchange. Tedd George, Chief Narrative Officer at Kleos Advisory, discussed the wider implications for the cocoa industry in the coming year. George highlighted that prices reached over £10,000 sterling a tonne in April last year, translating into a two to threefold increase from previous years. While current prices have slightly weakened to around £8,700, they are still significantly higher than before. To mitigate potential supply disruptions, chocolate producers and traders are looking at alternatives and ways to reduce cocoa usage in chocolate products. There is also a shift towards sourcing cocoa from Latin American producers like Ecuador. However, with cocoa prices projected to ease by approximately 13% this year, new entrants are expected to enter the market to alleviate supply concerns. Despite reports of a relatively good crop season in West Africa, high demand for cocoa is likely to keep prices elevated. Furthermore, weather conditions, exacerbated by climate change, remain a significant threat to cocoa production. The switch from El Nino to La Nina weather patterns could bring excessive rainfall, potentially leading to black pod disease in cocoa crops. Additionally, the rise in global temperatures poses uncertainties for soft commodity sectors like cocoa. Regarding efforts to address supply chain risks, some chocolate makers are seeking permission to buy substantial amounts of cocoa beans on the ICE Futures Exchange. While trading houses often engage in hedging activities on behalf of chocolate companies, initiatives like the Africa Cocoa Exchange aim to establish a more direct trading platform for cocoa within Africa. George emphasized the importance of fostering relationships with cocoa farmers to secure bean supply and mitigate market risks. Amid discussions of technological advancements, lab-grown cocoa has emerged as a potential solution to increase cocoa production. However, scalability remains a challenge, as large-scale plantations are required to meet global demand for cocoa. In regions like Ghana, the cocoa industry faces additional threats from illegal mining activities that deplete arable land and pollute water resources. Poverty and inadequate market prices contribute to farmers selling their land for illegal activities, underscoring the need to enhance economic incentives for sustainable cocoa farming practices. Governments in cocoa-producing countries must support farmers to prevent land degradation and promote long-term cocoa cultivation. Despite the uncertainties and challenges ahead, stakeholders in the cocoa industry are actively exploring innovative solutions to ensure the sustainability and resilience of the global cocoa supply chain in 2025.