Cocoa Supply Shortage Likely To Persist

Cocoa is not typically a closely watched commodity, but for those who have been watching significant profits may have already been collected with more to come as the delicious product is now reaching record levels, with little relief in sight.

The issue is a supply concern as cocoa farmers in West Africa have been hit by a trifecta of bad weather, diseases, and failing trees. The combination is creating one of the worst supply deficits for cocoa in decades, with prices more than tripling over the past 12 months and up 129% since the start of 2024.

Tuesday’s price action saw cocoa futures for May delivery surging to an all-time intraday high of $10,080 per metric ton before ending the day down 0.3% to settle at $9,622.

The world is currently seeing the largest cocoa deficit in 60 years, with expectations of a shortfall of 374,000 tons, and, while chocolate producers like Hershey’s and Nestle have been able to hedge their positions and keep consumer prices in check, it’s expected that chocolate prices for consumers will see increases by the end of this year.

Because there’s no easy fix to the problem cocoa prices are expected to remain elevated for the remainder of 2024 at the least. The Ivory Coast and Ghana produce some 60% of the global supply of cocoa, but both countries are seeing poor weather conditions and several cocoa-related diseases. Compounding the issue is the fact that many of the remaining healthy trees are beyond their peak yield potential. Neither country has had a major round of new planting since the early 2000’s.

Analysts believe much of the current run-up in prices is due to speculation from producers trying to lock in prices.