High cocoa prices add to the problems of chocolates

Chocolate producers may have no choice but to raise prices this year, as all production inputs such as cocoa, sugar and energy have become more expensive. The biggest concern is the price of cocoa, which is rising to its highest level in 46 years.

According to BMI, a unit of Fitch Solutions, high cocoa prices have exacerbated chocolate makers’ sugar problems, and the cost of energy is also weighing on margins. “In 2023, the FAO sugar price index was 26.7 percent higher than in 2022 and 60 percent higher than the pre-pandemic average (2015-2019). and we expect that 2023-2024 will be the third consecutive year of deficit in the market . We expect the growth rate to slow due to the adjustment of the demand side to the increased prices, the research institute said. 

Supply constraints 

 On Monday, cocoa futures hit a fresh high of 3,771 pounds per tonne ($4,709.8) in London amid ongoing West African cocoa supply constraints. The Trading Economics website quoted Tropical Research Services as saying that Ivory Coast and Ghana are facing  hurdles, including swollen shoot virus and aging tree stock, which could continue to affect yields even as weather conditions improve. The International Cocoa Organization (ICCO) said blackening disease and swollen shoots caused by heavy rains in the last quarter of 2023 added to ongoing concerns about supply shortages. BMI said cocoa prices rose 60 percent through 2023, while December’s average of $4,218 per tonne was the highest one-month nominal average since July 1977.

“The main driver of the price increase in 2023 was supply constraints, mainly due to adverse weather conditions in West Africa, which produces 75 percent of the world’s cocoa,” it said.

Unstable Outlook

ICCO said supply was the main driver of price increases in 2023. Tropical Research Services said the outlook for cocoa supply and prices in 2024 remains volatile. ING Think, the economic and financial analysis of Dutch multinational financial services company ING, reported that London cocoa traded at record highs. Expecting a third consecutive deficit, the cocoa market is likely to remain volatile until 2024. “However, current inventory levels make it difficult to justify the strength of the market”. BMI said climate-related concerns pose the biggest additional risks, with the likely continuation of El Niño in April 2024 expected to bring below-average rainfall to West Africa.

Leave a Reply

Your email address will not be published. Required fields are marked *