Cocoa price increase pushes up the prices of other products
In July 2023, cocoa prices reached a 46-year high on the London Stock Exchange. And just two weeks after the UK highs, the cost of the product jumped again to a 12-year high, but already on the US commodity market. The reason for the price fluctuations was a reduction in supply from producers.
The July contract for the product on the New York Stock Exchange reached USD 3429. This was the highest cost per tonne since 2011. Back then, the figure was USD 3407.
Cocoa is one of the most sought-after agricultural commodities. Demand for it is growing against the backdrop of a significant decline in production in West Africa. This region is the world’s largest producer of the commodity. Analysts’ forecasts of a reduction in cocoa production in the near future are also contributing to the price increase. According to experts, Nigeria, Ghana, and several other producing African countries could face dry weather due to El Niño. As a result, there may be a significant reduction in the cocoa crop, which will cause price volatility in the market for both the product and its derivatives.
It is worth noting that plantings traditionally decline in the year of El Niño. However, Rabobank’s Paul Jowles expects the El Niño period to be stronger in the short term than in previous years. As a result, drought damage could be more severe. He says the current financial year and the 2024-2025 season will see yield reductions in Africa.Côte d’Ivoire is a major cocoa producer. Analysts note that the current season began with local ports reporting reduced cocoa shipments to importers. Compared to previous periods, they were down by 4%. This information led to a 0.7% increase in the cost of futures for the product on the London Stock Exchange. The price was 2532 pounds per tonne. There is also an increase in the price of other commodities:
– a pound of raw sugar rose by 0.3% to about 23.9 cents;
– a pound of Arabica coffee increased by 0.3% to USD 1.6;
– tonne of Robusta was up 0.8% to USD 2,532.
At the same time, analysts believe that the market remains relatively calm and that price dynamics are under control.
Impact of cocoa price increases
The rise in the price of cocoa will lead to an increase in the cost of products made from cocoa. First of all, chocolate, which is already becoming more expensive. The American company Circana has carried out a study of the local market. According to its findings, the cost of chocolate in the country will increase by 20% between 2021 and 2023. In addition, manufacturers have long been trying to limit the increase in the price of their products. They have reduced the weight of chocolates and sweets and used different textures and palm oil. Now the situation has worsened, and it is not just in the US that product prices will rise.