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Commentary: Brace for higher chocolate prices, the crisis is inevitable

Commentary: Brace for higher chocolate prices, the crisis is inevitable


But the low prices have had consequences. The last wave of tree planting in West Africa took place in the early 2000s, particularly around the north-west of Ivory Coast. Those trees are nearly 25 years old, well past their prime. Husbandry has decayed, too, with little use of fertiliser and pesticide.

Old cocoa trees mean two problems: Lower yields, and plants particularly vulnerable to bad weather and disease. Both factors are at play this year – punishing farmers who are missing out on the record prices.

The local markets in Ivory Coast and Ghana are tightly controlled by their governments, which set official prices. By selling forward, officials guarantee a price, but that also means that farmers miss out on rallies. For the 2023-24 crop, Ivorian farmers are getting 1,000 central African francs (US$1.63) per kilogramme, about 70 per cent below the current wholesale price.

The upshot is a brutal gap between supply and demand. Even when accounting for the damping impact of high prices on consumption, the market is heading for a deficit of 300,000-to-500,000 tonnes, according to my soundings within the industry. If confirmed, that would be the largest shortfall in at least 65 years – and probably ever. 

With demand outstripping output by so much, inventories will fall for the third consecutive year. Inside the industry, I hear that by the end of the season, cocoa stockpiles, measured by the stock-to-consumption ratio, could drop to as little as 25 per cent, comparable to the record lows seen in the 1970s.

Considering shipping lags, it means the industry is running on virtually no inventory at all. Cocoa brokers report that’s almost impossible to find offers for beans right now – despite the fact that February marks the harvest peak, when warehouses at West African ports should be full. 

There’s another side to the supply problem. In the last 30 years, demand has doubled, and only much higher prices are likely to slow the trend. Still, beyond the United States and Europe, global chocolate consumption remains small on a per capita basis, creating new markets for expansion.

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