Take heed if you have a sweet tooth: Because of the rising cost of cocoa, chocolate prices may increase.
Increasing prices may be beneficial for cocoa producers in need. But for consumers managing their spending, those prices, together with the rising costs of other essential components in chocolate, may not be good news.
Futures for cocoa have increased by around 21% so far this year. As is frequently the case, a shortage of supply has led to rising costs.
Due to crop disease and a lot of rain this season, cocoa yields are below average. And because of El Nino, a phenomenon that occurs periodically in the tropical Pacific Ocean and often delivers greater global temperatures – unfavourable circumstances for cocoa cultivation — forecasts anticipate another shortage next season.
Demand for cocoa and dairy products has been high, particularly in Europe and Asia. However, supply has been falling short, leading to a supply deficit due to reduced production. This could be due to crop disease, such as swollen shoot disease, which is carried by insects and has been a challenge for cocoa production in countries producing cocoa. Farmers often have to remove diseased trees and plant replacements to combat the disease, which could take years to reach peak productivity. Other factors, such as ageing plants, may also contribute to the reduced yield.
Ivory Coast, the world’s largest producer of cocoa, is facing challenges due to heavy rains and increased crop disease risks. El Nino is also posing a threat to the harvest for the upcoming season, further complicating the situation. The region’s poor weather has a significant impact on the world market for cocoa, with Ghana, Cameroon, and Nigeria each providing around a quarter of the total supply.
Prices are rising, and Tony’s Chocolonely, an Amsterdam-based chocolate firm, is pleased with the increase in prices. The company has raised prices for merchants in the US market since entering the US market in 2015, by around 8%. However, future price intentions for the business were not disclosed.
Other chocolate manufacturers have also experienced price increases due to the rising cost of cocoa. Hershey, the CFO of Hershey, has expressed concerns about cocoa and sugar prices moving in the wrong direction but has not mentioned price increases. The full extent of the price increase for customers will not be seen until new contracts are in place.Customers may not fully appreciate the impact of higher prices, as the entire amount of price increase for customers will not be visible until new contracts are in place. Any increase would be added to already high retail chocolate costs.