Cocoa prices are soaring to new heights due to severe weather conditions in Ghana and Ivory Coast, the world’s top cocoa producers. The destructive impact on crops has triggered a supply shortage, leading to skyrocketing prices. Farmers in the affected regions are reporting unprecedented harvest failures, with one trade cooperative president expressing despair over the situation. As a result, cocoa prices have more than doubled since the beginning of 2023. However, experts warn that the surging prices could potentially threaten demand, adding to the existing challenges faced by major global economies grappling with elevated inflation.
Both the London and New York cocoa markets are witnessing a meteoric rise. This week, cocoa prices reached record levels, with London hitting £4,248 per ton and New York reaching a 46-year high at $5,288 per ton. Analysts predict that the New York cocoa price may soon approach the all-time high of $5,379 per ton set in 1977. Last year’s prices already surpassed previous peaks from 2011, which were driven by concerns over post-election violence in Ivory Coast.
The main driver behind the price surge is declining cocoa production caused by plant diseases favored by heavy rainfall. More farmers in West Africa are reporting outbreaks of black pod disease, which damages and rots cocoa pods. These diseases have spread rapidly due to an imbalance in sunlight and precipitation, vital for the cocoa plant’s growth. The situation was exacerbated last July when heavy rains coincided with flowering in Ivory Coast’s south, leading to a significant reduction in cocoa production. Consequently, the Coffee-Cocoa Council suspended export contracts, worsening the already grim outlook.
Producers now face additional challenges as the El Nino climate phenomenon resurges, further endangering cocoa crops in western Africa. El Nino causes extreme weather conditions, including droughts and floods, and is expected to persist until April. Traders and analysts express concerns about another short production year due to El Nino’s potential impact. The combination of plant diseases, unfavorable weather, and climate change poses significant ongoing difficulties for cocoa farmers.
Ghana, which has six cocoa-growing regions, has also been affected by dwindling soil fertility and fluctuating rainfall, leading to a geographic shift in cocoa production toward the west of the country. Together, leading producers Ivory Coast and Ghana accounted for nearly 60% of the global cocoa harvest in 2022/2023.
The current trajectory suggests that the cocoa market is likely to face a supply deficit for the third consecutive year, further exacerbating the challenges faced by the industry. Farmers bear the brunt of these difficulties, with reductions in their harvests leading to financial strain. The impact extends beyond the agricultural sector, potentially affecting the chocolate industry and consumers worldwide.
In conclusion, cocoa prices continue to hit record highs due to the devastating effects of adverse weather conditions and plant diseases in Ghana and Ivory Coast. The consequential supply shortage has created an imbalance in the market, leading to a surge in prices. While this situation may benefit cocoa farmers in the short term, the long-term consequences could threaten demand and aggravate existing economic challenges. The resilience of cocoa production remains uncertain as climate change poses ongoing challenges for the industry.
