Chocolate makers struggle as cocoa prices soar

The cocoa market is facing significant challenges as cocoa prices continue to soar, causing a ripple effect on chocolate makers and consumers worldwide. The recent surge in cocoa prices can be attributed to catastrophic weather conditions and crop diseases in West Africa, which have led to a historic low in cocoa supplies. Tedd George, Chief Narrative Officer at Kleos Advisory in the UK, sheds light on the dynamics within the cocoa market and the structural issues at play. According to Tedd George, the cocoa crop has not fully rebounded from the previous devastating season, resulting in a shortage of beans and subsequent increase in cocoa and chocolate prices. Despite some improvements in the current crop, the overall production is still below the levels seen in previous seasons, pushing cocoa prices back above $10,000 a tonne. One of the key structural issues contributing to the cocoa market's challenges is chronic underinvestment in cocoa farms. Climate change and deforestation have disrupted weather patterns and hampered regular cocoa production in countries like Cote d'Ivoire, Cameroon, and Ghana. While advancements in digitalization and traceability have been made in West Africa, the focus must shift towards sustainable production practices to ensure the long-term viability of the cocoa industry. Looking towards the future, Tedd George predicts a slightly better outlook for the cocoa crop in 2025-2026. However, he highlights the prevalence of smuggling in regulated markets like Ghana and Cote d'Ivoire, where fixed prices at the farm gate incentivize farmers to sell their beans at higher rates in liberalized markets like Nigeria and Cameroon. Addressing smuggling is crucial to ensuring government revenue and sector investment in cocoa-producing countries. As cocoa prices continue to rise, the implications for chocolate brands and consumers are significant. The cost of chocolate production is not solely dependent on cocoa prices but also on other factors like dairy, packaging, transport, and energy costs. This could lead to higher chocolate prices and potentially a shift towards lower cocoa content in everyday chocolate products to manage costs. In addition to cocoa, coffee prices have also been on the rise, with differences between Robusta and Arabica varieties influenced by varying weather conditions in key producing regions. Both cocoa and coffee crops are sensitive to weather disruptions, affecting the overall supply and demand dynamics in the market. Looking ahead, Tedd George emphasizes the need for reform in the cocoa sector, with initiatives like setting up an Africa cocoa exchange and enhancing pricing control to stabilize the market. Key players in the industry, like Cocoa Bod, are focused on driving reforms to improve sector management, boost investment, and meet the growing global demand for cocoa. As the cocoa market grapples with challenges, stakeholders are bracing for a period of change and adaptation to navigate the evolving landscape of the chocolate industry. With cocoa prices at record highs, the resilience and innovation of chocolate makers will be put to the test as they strive to meet consumer demands while managing escalating production costs.