Cocoa Prices Hit Record $10,030/Metric Ton

Key Points:

• Cocoa prices surpass $10,000 per metric ton for May delivery, marking a 3.9% increase.
• West Africa, producing about 70% of the world’s cocoa, faces significant weather and disease challenges.
• Ivory Coast and Ghana witnessed a substantial decrease in port arrivals, influencing global cocoa markets.

In an unprecedented move that caught the attention of global markets, the price of cocoa for May delivery saw a remarkable jump of 3.9%, setting a new record at $10,030 per metric ton. This unprecedented hike, marking cocoa’s first breach of the $10,000 threshold, reflects a staggering year-to-date surge of about 138%. Such a monumental rise in cocoa prices stems from a series of production challenges in West Africa, notably in the Ivory Coast and Ghana, which collectively contribute to about 70% of the world’s cocoa supply.

West Africa’s Cocoa Yields Under Threat

The heart of the world’s cocoa production lies in West Africa, with the Ivory Coast and Ghana at its core. Recently, this region has encountered severe setbacks due to heavy rainfall, periods of dry heat, and the spread of black pod disease. An International Cocoa Organization (ICCO) report highlighted adverse conditions, consequently revealing their detrimental impact on cocoa yields. Moreover, poor road infrastructure has further exacerbated these challenges, hindering the transportation of beans to ports and, thus, slowing down the supply chain.

Cocoa Prices Shortfall: Port Arrivals Down 28-35%

The ICCO notably highlights that the Ivory Coast’s and Ghana’s variable cocoa production capacities crucially sway the global cocoa market. Data from a February report by the ICCO underscores the severity of the situation, with a 28% decline in port arrivals from the Ivory Coast. Moreover, there has been a 35% drop in Ghana compared to last season. These stark decreases highlight the fragile global cocoa supply and demand balance, signalling significant market adjustments ahead.

Hershey Navigates 12% Income Dip, Price Hikes

Amidst these supply-side pressures, Hershey’s financial outlook has been notably impacted. The company has forecasted flat earnings growth for the current year, attributing this stagnation to the soaring cocoa prices. CEO Michele Buck emphasised Hershey’s resilience despite a 12% dip in net income to $349 million in the fourth quarter compared to the previous year. By leveraging a robust hedging strategy and strong price visibility into 2024, Hershey aims to navigate these tumultuous times cautiously.

The recent surge in cocoa prices, driven by production challenges and global supply chain constraints, reflects corporate strategic responses. Therefore, as stakeholders adapt, the cocoa market evolves, facing challenges and opportunities amidst uncertainty, presenting dynamic shifts and potential gains.