Why Are Cocoa Prices Surging?

Cuckoo for Cocoa

Cocoa prices have more than doubled in the past year, and rose around 40% since the start of 2024.

The price of cocoa futures contracts on the Intercontinental Exchange (ICE) reached an all-time high last week and is still sitting well above the previous peak recorded all the way back in 1977.

With Valentine’s Day around the corner, you may be excused to ask whether this is about heart-shaped chocolates. But don’t blame it on the time of year, blame it on the weather.

Crop Collapse

The El Niño weather phenomenon that is contributing to historic rainfall on the West Coast of the U.S., is drying out West Africa, where three-quarters of the world’s cocoa is produced. There is concern the current dry spell could leave a permanent mark on cocoa yields. Supply concerns already caused a temporary stop of exports to certain players in Cote d’Ivoire last year. The country alone accounts for around 44% of the global cocoa supply.

That’s bad news for chocolate makers and consumers.

The Cost of Cocoa

Corporations have also had to weather the storm — or lack thereof. Hershey (HSY) is forecasting flat earnings growth in 2024, thanks to historically high cocoa prices. Major manufacturers like Nestlé (NSRGY) and Cadbury (MDLZ) have increased prices to offset rising costs, and additional price hikes are possible.

With El Niño expected to persist through Spring 2024, the cocoa shortage could extend into 2025.

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