Increasing Cocoa Prices Due to Lower Global Supply in 2024

Cocoa Bean
Ivory Coast
Published Apr 4, 2024
The cocoa industry plays a crucial role in global agriculture and commerce, supporting millions of smallholder farmers worldwide. However, the market faces volatility due to various factors, including political uncertainties and weather-related challenges. In the 2022/23 season, Africa led cocoa production, with Côte d'Ivoire and Ghana as top producers. Despite this, the International Cocoa Organization forecasts a significant decline in production for the 2023/24 season, mainly due to challenges in key cocoa-producing countries. Consequently, cocoa prices have surged, increasing by 239.21% since the same week last year. This surge is attributed to decreased supply from major producers, creating opportunities for smaller producers.

The cocoa industry holds a pivotal position within global agriculture and commerce, encompassing the cultivation, harvesting, and processing of cocoa beans essential for chocolate production. Millions of smallholder farmers worldwide rely on cocoa farming for their livelihoods, fostering rural development and bolstering global food security. Over the past four decades, cocoa production has steadily risen, with up to 95% of cocoa beans traded on international commodity markets. Yet, the cocoa market's inherent volatility, driven by political uncertainties, weather-related production shortfalls, and periods of overproduction in cocoa-producing nations, presents a formidable obstacle.

In the 2022/23 cocoa season, Africa led global production with 73%, followed by the Americas at 21%, and Asia/Oceania at 6%. Key regions in Africa, such as West Africa, the Americas encompassing Central and South America, and Asia/Oceania, contributed significantly to cocoa cultivation, reflecting the diverse distribution of production regions worldwide.

Figure 1. Cocoa Producing Regions in the 2022/23 Season

Source: ICCO, Swiss Platform for Sustainable Cocoa

In the 2022/23 cocoa season, several countries emerged as the top producers, collectively shaping the global cocoa landscape. Côte d'Ivoire led the pack with a commanding 44% share of global production, solidifying its position as the world's largest cocoa producer. Following, Ghana contributed 14%, further consolidating West Africa's dominance in cocoa cultivation. Additionally, representing the Americas, Ecuador secured a notable 9% share. Cameroon and Nigeria each contributed 6%, further bolstering West Africa's standing as a key cocoa-producing region. Brazil and Indonesia, prominent players in the industry, contributed 4% and 3% respectively, while Papua New Guinea made a modest 1% contribution. The remaining 13% is produced by the rest of the world.

Figure 2. Top Cocoa Producing Countries in the 2022/23 Season

Source: ICCO, Swiss Platform for Sustainable Cocoa

Production Overview

The International Cocoa Organization (ICCO) released their 2023/24 forecast for the cocoa industry. The forecast indicates that production is projected to drop from 4.996 million mt to 4.449 million mt, marking a decrease of approximately 10.95% year-over-year (YoY). Similarly, end-of-season stock is forecasted to decrease from 1.769 million mt in the 2022/23 season to 1.395 million mt, reflecting a drop of around 21.14% YoY. This significant reduction in both production and stock levels underscores the challenges the industry is expected to face during the season.

Figure 3. Cocoa Production Forecast for the 2023/24 Season

Source: ICCO

Cocoa production is projected to drop significantly due to various factors affecting key producing countries like Côte d'Ivoire and Ghana, which collectively account for over 58% of global cocoa supply. Multiple factors are leading to the expected decrease in global cocoa production, such as climate change, pests, diseases like swollen shoots, and aging orchards. The El Niño weather phenomenon, especially impacting West Africa, has played a significant role in this decline, bringing irregular heavy rains followed by dry heat. In contrast, Central Africa and Latin America have not witnessed substantial losses in production. Moreover, stringent regulations by the European Union (EU) aimed at curbing deforestation for cocoa cultivation have added pressure on African producers. These regulations demand compliance with labor rights and forest protection, posing additional challenges for farmers already grappling with structural issues.

In Côte d'Ivoire and Ghana, the internal cocoa markets face heavy regulation and taxation, which have hindered adequate benefits for producers despite the soaring cocoa prices. Consequently, this has diminished incentives for further production and investment in the sector. Consequently, the decline in cocoa output in both Côte d'Ivoire and Ghana has propelled cocoa prices to unprecedented levels, exacerbating financial strains for stakeholders and raising concerns about the long-term sustainability of cocoa production.

Increasing Cocoa Prices

On 24/03/2024, the cocoa price reached USD 9,844/mt, indicating a substantial surge in cocoa prices. This surge marks a noteworthy increase of 239.21% since the corresponding week last year, when the price stood at USD 2,903. Analyzing the data from the start of the year, cocoa prices have demonstrated a remarkable upward trajectory. Beginning at USD 4,204/mt in the first week of 2024, prices steadily climbed over subsequent weeks by 134.16%, reaching USD 9,844/mt. Furthermore, comparing the latest price to the previous month, there has been a notable month-on-month (MoM) increase of approximately 44.21%, rising from USD 6,826/mt on 25/02/2024. This upward trend underscores the sustained momentum in the cocoa market.

Figure 4. Cocoa Futures 2024

Source: CNBC

The recent surge in cocoa prices is mainly due to a significant decrease in supply from major cocoa-producing countries like Cote d'Ivoire and Ghana. As a result, the scarcity of cocoa beans has driven prices upwards in international markets. This shift in market dynamics presents an opportunity for smaller cocoa-producing countries outside of Africa, such as Ecuador and Brazil. With the increased global demand for cocoa, these countries might experience a surge in demand for their cocoa beans, potentially benefiting from the higher global prices and filling the supply gap left by the reduced output from Cote d'Ivoire and Ghana.

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