Water shortages in Africa and volatility in the cocoa market put pressure on the chocolate industry

By: Claudemir Zafalon High volatility dominates the sessions leading up to the September contract's physical delivery period, scheduled for August 26. Last week, the cocoa market saw a significant rise, driven by statements from Forecaster Maxar Tech's climate analyst, who indicated that Africa's main producing region is still facing a water deficit due to the significant reduction in rainfall over the last month. This adverse weather scenario led the most active contract, due in December, to reach a price of US$7,525 per ton on Friday, culminating in a weekly gain of over 10%. Reflecting the impact of this sharp rise in cocoa prices, Cadbury Australia has made the decision to double the price of its iconic Freddo Frogs and Caramello Koalas chocolates. This price adjustment, the first in over a decade, raised the retail cost from $1 to $2 Australian dollars (US$1.32), which the company explained as a consequence of “record cocoa prices and rising input costs”. In terms of stocks, ...