Cocoa is currently experiencing unprecedented popularity, reaching an all-time high in price on the New York exchange, hitting the $5800 mark by mid-February. The price gained more than 30%, which is an all-time high. Let’s delve into the factors driving this surge in the cocoa market and explore its potential impacts on both markets and daily life.
To begin, let’s take a look at the chart demonstrating cocoa price movements since the beginning of 2024. The line is pretty straight. Additionally, as judged by the volume indicator, the volume points are also high.
Over 30% since the start of the year is massive, especially considering the relatively short time frame of a month and a half. However, the following chart illustrates even more remarkable growth. It began in 2023, with prices skyrocketing by over 100%. Over the past five years, the increase has surpassed 150%.
However, the critical change in the trend occurred not long ago – in 2023. There are two factors affecting the industry that are tied to West African countries, Cote d’Ivoire and Ghana, which are leaders in cocoa bean production.
The first factor is the El Niño weather phenomenon, resulting in warmer surface waters in the Pacific and subsequently causing hotter and drier weather in the region. Such conditions lead to a decrease in harvest yields.
Simultaneously, the cocoa trees are afflicted by the cacao swollen shoot virus, which has plagued African farmers for the past few years. What’s more, they can’t replant trees on the affected land for five years following the onset of the virus. Earlier, farmers relocated to other forests to plant cocoa trees, but this practice is restricted to preserve forests. With no cure for this disease, many producers have opted to switch to alternative agricultural ventures.
Both of these factors have significantly reduced cocoa supply, a trend that continues to persist. Additionally, global tensions, such as those in the Red Sea, further exacerbate concerns surrounding trade routes.
The growth of cocoa prices naturally impacts both chocolate producers and chocoholics. Higher prices may lead to increased costs for chocolate products, potentially resulting in decreased sales volumes as consumers seek to economize. However, the immediate effects of these changes may not be readily apparent, as candy makers may choose to maintain prices to retain their customer base.
