Cocoa Prices Hit Historic Milestone

Market forces, illegal smuggling, and climate impacts have pushed cocoa prices over the $10,000 mark for the first time.

The surge to historic cocoa prices of $10,294 per ton arrives amid a meeting of adverse events. In Ghana and Ivory Coast, two pillars of global cocoa supply, environmental and human-induced challenges are tightening the screws on availability, leading to price hikes that affect everyone from local farmers to global consumers.

Not only are unpredictable climate patterns to blame but so too are human actions that undermine the sector's stability. According to a report issued by the Ghana Cocoa Board in January, one of the chief factors behind the dwindling cocoa supply is the rampant smuggling of beans to neighboring countries like Cote d'Ivoire and Togo, a practice that siphons off important revenues.

The scourge of illegal gold mining, or 'galamsey,' further devastates Ghana's cocoa fields, the Ghana Cocoa Board said, laying waste to vast tracts of land once teeming with cocoa trees. The unchecked destruction, especially pronounced in regions like Wassa Akropong and Akwatia, contributes to the decline in cocoa output, with enforcement efforts seemingly at a standstill.

Adding to the woes is the affliction of Cocoa Swollen Shoot and Virus Disease (CSSVD) alongside the challenge of aging and unproductive cocoa farms. CSSVD impacts approximately 17 percent of Ghana's total cocoa tree stock, while 23 percent of trees are overaged, moribund, and yield no cocoa.

The situation leaves only 60 percent of the country's cocoa tree stock as productive, with the remaining 40 percent being essentially redundant, the report said.

Since the start of the season, cocoa arrivals at Ivorian and Ghanian ports are down 28 percent and 35 percent, respectively, from the same period last year, according to the International Cocoa Organization's (ICCO) monthly report on the cocoa market.

The Ghana Cocoa Board reported earlier this year that its 2023-2024 harvest is expected to plummet to a 22-year low, with projections falling to a maximum of 425,000 metric tons.

Ivory Coast, sharing similar climatic grievances, finds its cocoa regions under threat from the same challenges. A recent lack of rain paired with relentless sunshine poses risks to the April-to-September mid-crop, farmers in the region said, according to a report issued Monday by Reuters, potentially exacerbating the already strained supply lines.

"The El Nino weather pattern the world is experiencing is adversely impacting cocoa farming in West Africa and sugar production in India and Thailand," Patrick Penfield, Supply Chain Professor at Syracuse University shared with Newsweek via email.

The ramifications of the cocoa price surge extend into the broader economy, affecting more than the cost of chocolate bars, which will also be more expensive soon, according to Penfield. As farmers in the primary cocoa-producing regions confront the dual challenges of decreased production and increased costs, the ripple effects will be felt from small family-run confectioneries to multinational chocolate corporations.

"Chocolate will continue to increase in price for the remainder of the year due to elevated demand and lack of cocoa supply," Penfield told Newsweek, noting that consumers have already seen increased prices for "many confectionary products."

Recent projections from the ICCO don't help the situation. The global 2023-2024 cocoa deficit is expected to widen to 374,000 metric tons from the previous year's 74,000 metric tons, signaling a deepening crisis in the cocoa supply chain.

The shortfall, according to the ICCO, is attributed to an anticipated 10.9 percent year-over-year drop in global cocoa production, plummeting to 4.449 million metric tons.

The future of cocoa production—and by extension, the global chocolate industry—hinges on an effort to support sustainable farming practices.

To help mitigate the current supply crunch, the Ghana Cocoa Board advised farmers to utilize what it terms the "4Ps"—Pruning, Pollination, Poultry Manure, and Protection.

The initiative promotes regular pruning of cocoa trees to increase yield, innovative pollination techniques, the use of poultry manure for soil fertility, and enhanced protection against pests and diseases.