Cocoa, here’s why prices are skyrocketing: risk of a blow to chocolate. The case
The price of cocoa has reached historic records, with futures in New York exceeding ten thousand dollars a ton, in particular due to the damage suffered by plantations in West Africa due to the passage of El Niño. Côte d’Ivoire and Ghana, main producers, are affected, with a 70% reduction in harvests.
The size of the deficit sparked a price rally, fueled by hedge funds investing more than $8 billion in the markets. However, there are doubts about the sustainability of this increase, with some traders selling futures for values higher than their actual stocks. New European Union rules could further complicate the situation by reducing the availability of cocoa. Higher prices will not immediately benefit farmers, but could lead to a chocolate shortage and further price increases for end consumers.
“In January 2023 the international price of cocoa was around $2,500 per ton, the same level as in 2010. In recent months, however, this price has shot upwards, and today it borders on $10,000 – explains Ispi, Institute for International Political Studies – Why this surge?
“First of all, the terrible harvests in Ghana and Ivory Coast, where normally more than 60% of the world’s cocoa crop is produced. 2024 will be the third year in a row in which global cocoa demand exceeds supply, forcing a need to draw on supplies. To complicate the situation, there is a second problem: too many traders had bet on a good harvest that would bring the price down, and had therefore decided to sell short. Today these traders are forced to close their positions by purchasing cocoa, and therefore further strengthening the upward trend in prices. A short circuit that shows the risks of the high financialisation of global commodity markets”.
