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Lots of chocolate at Coastal Cocoa

On Cocoa Prices

Food price inflation has been a big challenge for many people over the last couple of years, but few products have been as badly impacted as chocolate. You may have seen stories in the press about chocolate prices increasing, but to put some figures to it, the couverture chocolate I use is about to increase in price by around 40%, and that is on top of a 45% increase since this time last year. In other words over the last 12 months the price has doubled. That’s why anyone passing the shop earlier this week will have seen big stacks of chocolate on the tables, as I stock up ahead of the price rises.

Lots of chocolate at Coastal Cocoa
Cocoa prices

Cocoa is traded as an agricultural commodity on the open market, so it is relatively easy to see what is happening to the price of the beans, butter and powder. These graphs don’t make pretty viewing. In April 2023 cocoa beans were around $3,000/tonne. At its peak, one year later, the price had quadrupled at more than $12,000. While prices then dropped to around $7,000, they have now increased again to over $10,000.

So why is this happening? Prices generally go up when demand increases or supply decreases, and in the world of cocoa it is the latter that is the main issue. Rainfall in West Africa, where most cocoa is grown, has been up to 40% higher than usual, probably due to climate change. This has damaged crops as well as causing flooding which makes roads from farms to ports impassable. Additionally this has contributed to the spread of black pod disease and swollen shoot virus which both infect the cocoa plant. There has also been a lack of investment. Many farmers are so poor that they can’t afford to replant their trees and those they have are old, leading to lower yields and less resilience to poor weather and disease.
Normally one poor havest would not have such a big impact on the wholesale price because cocoa beans can be stored. The larger cocoa trading companies generally maintain buffer stock to ride out variability (and also to reduce the ability of producers to get a fair price, but that is a topic for another day). However with a couple of bad harvests, and also as a knock on from supply chain issues caused by Covid, war in Ukraine etc, those buffers have been run down. With low supply predicted, cocoa traders increased the number of future contracts they bought to protect against price rises. Hedge funds sensed instability in the cocoa market and began short selling cocoa futures, which has driven prices up further.

Torrential Rain
Black Pod Disease
Cocoa Beans

Who is benefitting from higher prices? Unfortunately not the farmers. They are seeing slightly higher prices, but these are being offset by lower yields. Certainly not the consumer, and when we talk about the cocoa market, chocolatiers like me are consumers just as much as you, my customers, are. The traders in the middle of the supply chain and the hedge funds are the main beneficiaries.
In the cheaper confectionary market this will mean big price rises, some supermarket products have already gone up by well over 60%. We can also expect to see more shrinkflation and lower quality ingredients (i.e. replacement of cocoa butter by palm oil).
For chocolatiers and chocolate makers there will be some difficult decisions to make.  Some will increase prices to reflect increased costs or reduce quality. Others will reduce the size of their products. And sadly I suspect some will be forced to close.

Personally, I have already spent some time this year improving efficiency, which will help. As will stocking up ahead of the latest price rise. Hopefully prices will go down again soon, but even if wholesale prices go down it will take several months for that to feed through the supply chain. Prices are likely to stay high for the rest of this year. Personally I am confident I can hold my prices through to Christmas. After that, who knows….