▲Chocolate (Photo=AFP/Yonhap)
The price of cocoa, the primary ingredient in chocolate, has reached an all-time high, surpassing the $9,000 mark for the first time. This surge is attributed to concerns of supply shortages due to reduced production caused by climate change.
According to Bloomberg, on the 25th (local time), cocoa futures traded in New York closed at $9,649 per ton, marking a 7.9% increase from the previous trading day. Within one day, the price rose by $700, breaking through the $9,000 threshold.
As a result, cocoa has become even more valuable than copper, often referred to as Dr. Copper, for its economic indicator status. On the same day, copper spot prices closed at $8,745 per ton on the London Metal Exchange (LME).
Bloomberg noted that “the cocoa price approaching $10,000 was a level that was unthinkable just a few months ago.”
The upward trend in cocoa prices is significant. Since cocoa was trading at around $2,800 a year ago, prices have surged by 244% over the past year.
During the same period, Bitcoin has increased in price by about 160%, from around $27,000 to its current level of around $70,000.
What is significant is that the escalation in cocoa prices is not a result of speculative trading. Bloomberg’s analysis indicates that the volume of open interest contracts, which are contracts retained by investors following the purchase or sale of futures or options contracts without offsetting them, has decreased since reaching its peak in January.
Furthermore, recent bullish bets on cocoa by asset management firms have plummeted to their lowest level in a year.
In light of this, Bloomberg suggested, “This price surge appears to have been driven by physical buyers playing a pivotal role.”
The surge in cocoa prices, reaching uncharted territory, is due to abnormal weather conditions that have affected major cocoa-producing regions such as Ghana and the Ivory Coast since last year. The spread of black pod disease, which decays cocoa pods due to heavy rainfall, has led to a sharp decline in production.
▲Over the past year, the trend of cocoa futures prices (Unit: Dollars per ton, Source: Trading Economics)
Over the past year, the trend of cocoa futures prices (Unit: Dollars per ton, Data: Trading Economics)
Meanwhile, Bloomberg reported that the price surge of more than 7% on this day was due to funding problems at the Ghanaian government agency, the Cocoa Board, which exacerbated the cocoa crisis.
At the end of last year, the Cocoa Board secured loans totaling $800 million from eight foreign banks, but it explained that the cocoa pods, which serve as collateral for an additional $200 million, were insufficient.
An informed source familiar with the matter stated, “Ghana’s funding issues stem from the expected cocoa harvest this year, estimated to be between 422,500 and 425,000 tons, which is half the level forecasted earlier this year.”
The Cocoa Board disburses the funds raised to farmers as wages.
As a result, there is momentum in the forecast that retail chocolate prices will continue to rise.
According to research firm NIQ, in the United States, prices of Easter-themed chocolates shaped like eggs and rabbits have risen by 12% compared to last year. In the UK, it has been reported that prices of popular Easter chocolates have surged by up to 50%.
However, the issue lies beyond this. Bloomberg pointed out that the current witnessed price surge reflects cocoa prices from last year, describing it as “the tip of the iceberg.” Bloomberg added that chocolates sold this Easter season are highly likely to have been made from raw materials purchased in the fourth quarter of last year or earlier.
Diana Gomes, an analyst at Bloomberg Intelligence, forecasted, “With the situation of supply shortages amid rising sugar prices continuing, chocolates could become even more expensive by next Easter.”
The industry is also preparing for product price hikes. Swiss chocolate brand Lindt announced its plans to increase prices this year and next due to the sharp rise in raw material costs.
Nestlé, on the other hand, has absorbed part of the cost increase through efficiency improvements but indicated that adjustments may be necessary in the future due to the cocoa price surge.
Bloomberg reported, “Major chocolate manufacturers who have already implemented price increases are leaving the door open for possible additional increases.”
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