Tariff war: Will chocolate prices soar higher?

The impact of President Trump's new tariffs on soft commodities, particularly cocoa, has been a major concern for analysts and traders alike. Cocoa prices have rallied to fresh two-week highs as a result of slowing cocoa exports from Cote D’Ivoire, putting pressure on the global chocolate industry. Tedd George, Chief Narrative Officer at Kleos Advisory, recently discussed the implications of the tariff wars on soft commodities, as well as the production and pricing outlook for cocoa, in an exclusive interview with CNBC Africa. The tariff wars have sent shockwaves through the soft commodities market, affecting various African countries exporting goods such as diamonds and cocoa. While cocoa production has not been severely impacted by the tariffs in recent years due to high demand, African exporters are facing a 10% tariff across the board, affecting their bottom line regardless of the specific country they are based in. With the future of the African Growth and Opportunity Act (AGOA) hanging in the balance, African countries like Nigeria are urged to leverage their trading partnerships with the European Union, China, the UAE, and India to offset the potential negative effects of the tariff wars. The fear of dumping on African markets looms large, leading to concerns about the impact on local industries. The surge in cocoa prices has already led major chocolate manufacturers like Mondelez and Hershey to forecast significant price hikes in the near term. Retail chocolate prices have already increased by 30-40%, with predictions of further escalation. Consumers may soon find that their favorite chocolate treats become luxury items, as manufacturers grapple with rising production costs and tariffs. In terms of cocoa production metrics, there has been a gradual improvement in numbers from Cote d'Ivoire, the world's largest cocoa producer. However, concerns about global demand and a potential recession continue to impact the industry. Tedd George highlighted the importance of initiatives like the Africa Cocoa Exchange pilot program in Nigeria, which aims to demonstrate how warehouse receipt financing can benefit cocoa farmers and improve trading practices. Looking ahead, the goal is to establish national exchanges and a regional exchange in West Africa to facilitate cross-border trade and value addition in the cocoa industry. By enhancing financial structures and promoting competitiveness, African countries can seize the opportunity to increase cocoa processing locally and benefit from higher value-added products in the international market. Despite challenges such as unreliable power supply, the cocoa industry in Africa shows promising signs of growth and entrepreneurship. Local companies are emerging and demonstrating potential for expansion, backed by expertise and innovation. As demand shifts and production stabilizes, there is hope for a resurgence in Africa's cocoa sector, driving economic prosperity and sustainability for the continent.