The Cocoa Crisis
You may want to take this as your opportunity to cut back on chocolate. Demand for chocolate is vastly outweighing the available cocoa supply, leading to skyrocketing cocoa prices.
You may want to take this as your opportunity to cut back on chocolate. Demand for chocolate is vastly outweighing the available cocoa supply, leading to skyrocketing cocoa prices.
The price spike has caused large African cocoa processors, who take raw cocoa and turn it into something usable for chocolate companies, to slash production since they can no longer afford to buy beans, further exacerbating the crisis.
On Friday, cocoa futures surged to a record $8,018 per metric ton, a 25% increase from last week and 215% higher than last year.
An Ivory Coast cocoa regulator said it expects the Ivory Coast mid-crop, which starts in April, to fall 33% to 400,000 metric tons from 600,000 metric tons last year. At the same time, the International Cocoa Organization projected that the global cocoa deficit would widen to 374,000 metric tons from 74,000 metric tons, largely because of unfavorable growing conditions and crop disease.
So, the problem is that cocoa can only be grown in a narrow strip of the globe. Nearly 75% of all cocoa comes from four West African countries, and any everyday person can go and buy a chocolate bar (whereas before, chocolate was a luxury good), which means there is growing demand from consumers and a shrinking supply because of poor growing conditions.
Prices for chocolate products at US retail stores grew 11.6% in 2023 compared to the previous year. Going forward, companies from Hershey to Mondelez warned they’ll have no choice but to pass on higher cocoa costs to consumers.
Hershey stock is down 28.37% from its high, Nestle is down 20.37% from its high, and Mondelez is down 8.14% from its high.
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