Cocoa prices hit historic $10,000 mark amid supply worries

Cocoa prices on commodity exchanges soared past the $10,000 per ton mark in March, setting new records. Experts attribute this surge to supply issues, though there's speculation about market speculation as well.

Recently, cocoa prices have continued their upward trajectory on global commodity exchanges, surpassing the significant threshold of $10,000 per ton—a historic high for this commodity. Just last week, the price of cocoa jumped by more than 6%, reaching over $9,000.

At the start of last year, prices were considerably lower, around $2,000. However, over the past 12 months, they have steadily climbed. By the end of last year, prices had exceeded $5,000, with the rate of increase further accelerating since the beginning of this year.

Economist Tomasz Wyluda commented on the cocoa market's situation on Twitter, noting, "The price of cocoa is reaching unprecedented highs, having already surpassed $10,000 per ton. This will soon lead to an increase in chocolate prices," he observed.

Wyluda believes that, in addition to poor harvests, the raw material's price is influenced by "low price elasticity of demand," implying that consumers are unlikely to reduce their consumption of sweets even as prices rise.

Wyluda also acknowledges the possibility of speculative activities in the futures market. Krzysztof Pawiński, president of Maspeks, offers a more definitive perspective, stating, "No extra demand or supply shock. It's purely speculation—futures contracts without actual delivery. This is the current trend. Financial instruments, originally designed to stabilize product price fluctuations, are now being used to disrupt the market," he asserts.

Market analysts point to supply problems as the primary driver of the price increases. Around 70 percent of the world’s cocoa is produced in West Africa, which has faced weaker harvests for the past three years due to unfavorable weather conditions—namely, higher temperatures and reduced rainfall, adversely affecting cocoa cultivation.

The International Cocoa Organization (ICCO) warns that we might see a record deficit in cocoa supply this season, estimated at 400,000 tons. Bloomberg Intelligence analysts suggest that the supply challenges could be long-term, while the global demand for cocoa continues to rise.

The dramatic rise in cocoa prices presents a significant challenge for the chocolate industry. According to Reuters, companies like Guan Chong from Malaysia, one of the largest cocoa processors globally, are exploring alternative sources of cocoa, including Ecuador, Peru, and Indonesia, to avoid disruptions caused by potential failures from major suppliers in the Ivory Coast and Ghana.

The increased costs of chocolate production are being transferred to consumers, particularly in Europe, a crucial market. The industry also faces potential obstacles from new EU regulations aimed at curtailing the sale of products that contribute to deforestation.

Despite the reasons, the sharp increase in cocoa prices is worrying for both chocolate manufacturers and consumers. Experts stress the importance of developing long-term strategies to ensure stable supply and mitigate further market volatility.