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There is a chocolate crisis around the world



Cocoa prices have recently reached their highest levels in nearly half a century, significantly impacting the chocolate industry by driving up production costs. In the bustling markets of New York, cocoa futures experienced a notable surge, climbing as much as 2.5% to levels not witnessed since the year 1979. This dramatic increase is largely attributed to the anticipation of poor harvests in Ivory Coast and Ghana, two of the world's leading cocoa producers, at a time when global demand for cocoa begins to show signs of recovery.


Jack Scoville, a seasoned expert and vice president at Price Futures Group based in Chicago, highlighted the bullish trends in the cocoa market, driven by these critical supply and demand dynamics. Specifically, cocoa designated for December delivery reached an astonishing $3,786 per metric ton in New York, marking a historical high not seen since the early days of 1979. This peak even surpasses the high set in March 2011, a period when the cocoa market was disrupted by an export ban during the civil war in Ivory Coast, leading to a significant spike in prices. Remarkably, cocoa has seen an increase of more than 40% this year alone, positioning it as the commodity with the most significant gains among those traded in the US markets.


Reports indicate that cocoa bean deliveries to ports in Ivory Coast are trailing by approximately 16% for this season, a situation that has caught the attention of market analysts. Many now anticipate a third consecutive year where the demand for cocoa outstrips supply, further tightening the market. This concern is compounded by the looming threat of El Niño, which is expected to bring drier conditions to West Africa, potentially exacerbating the challenges faced by cocoa crops.


On a more positive note, demand for cocoa is on an upward trajectory, with European bean processing exceeding expectations. Additionally, countries like Ivory Coast and Brazil are ramping up their cocoa grinding operations, signaling robust activity in the sector.

Historically, the cocoa market has experienced similar spikes, with prices reaching as high as $5,379 per ton in July 1977. This was another period marked by supply shortages that significantly influenced cocoa prices, mirroring the current situation.


The ripple effects of the soaring cocoa prices are already being felt across the chocolate manufacturing industry. Companies such as Mondelez International, the powerhouse behind the beloved Oreo cookies, and Hershey Co. have both acknowledged the upward pressure on cocoa prices, alongside other commodities, in their financial discussions.


Hershey's Chief Financial Officer, Steve Voskuil, specifically pointed out the adverse movements in cocoa and sugar prices, which are pivotal ingredients in their products. Looking ahead, there is a palpable concern within these companies that the current trends in cocoa prices might have a more pronounced impact in the coming years, particularly in 2024, as they continue to monitor market developments closely.


In summary, the cocoa market is at a critical juncture, with supply constraints and rising demand painting a complex picture for the future. As chocolate makers navigate these turbulent waters, the broader implications for the industry and consumers alike remain a topic of keen interest and speculation.

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