Dramatic headlines aside, chocoholics across the world are refusing to give up beloved chocolate flavored products. However, if the global cocoa supply continues to drop at the rate that it has been since January, chocolate may become a rare commodity in the Food & Beverage Industry as prices skyrocket. We’re giving you the latest insights on the cocoa market so you can make the best decisions regarding your chocolate flavored products in the months to come.

Origin of the Issue

Most of the world’s supply of cocoa beans comes from West Africa, with a moderate quantity also sourced from Brazil, Ecuador, and Indonesia. In fact, approximately two-thirds of the world’s cocoa production occurs in the West African nations of Ghana and Ivory Coast. Since the beginning of the year, this region has experienced disruptive weather patterns amplified by climate change and rising freight costs. A CNBC article reports that the El Nino weather phenomenon observed in West Africa this year may result in drought-like conditions that may permanently affect the yield of cocoa beans able to be produced there¹.

Cocoa harvests occur only twice per year, with the “main harvest” occurring from October to March. Since it rained more than usual in Western Africa for the last few months of 2023, several plant pathogens- such as black pod disease & swollen shoot virus- were able to spread between farms more easily. Additionally, a powerful cyclone ravaged Brazil right before harvest season last year. These factors alone already threatened the overall cocoa output this year and further exasperated the global cocoa supply crisis we are currently witnessing.

Additional root causes of the cocoa crisis include the global fertilizer shortage and economic paranoia that stems from the 2022 war in Ukraine. Because cocoa is a crop that requires a significant amount of fertilizer to grow commercially, the reduced amount of fertilizer being exported greatly impacted the overall yield of existing cocoa trees before unexpected weather had an impact. Europe is also the world’s leading importer of cocoa beans. When analysts started to predict that the cost of oil, coal, and gas would spike due to the Russian invasion, chocolate makers began placing fewer orders for cocoa out of financial fear⁴. As soon as fear subsided, there was a boom in demand for cocoa again, but with a more limited supply than ever before.

How to Navigate the Changing Cocoa Market

As a result of the changing weather patterns and shipping challenges, the price of cocoa has spiked by more than $2,000 per metric ton since January, reaching a record high of over $7,000 according to data released by Bloomberg on March 12 and as shown in the figure below⁵. Since cacao trees take years to mature enough to produce cocoa beans, these high prices aren’t expected to return to baseline anytime soon. Paul Davis, President of the European Cocoa Association, estimates that it may be another 1.5 to 3 years before chocolate producers can relax again.

Source: McKeany-Flavell

While passing the cost on to consumers is one option to navigate the ominous climate of the cocoa market, it is important to consider other strategies to keep your chocolate flavored food or beverage product in line with competitors.

• Diversification: Companies should consider diversifying their sources of cocoa to different regions of the world to mitigate the risk of supply disruptions from unfavorable weather pattern changes.
• Sustainability initiatives: Engage in cocoa farmers that have sustainability initiatives in place to ensure that the long-term viability of cocoa crops is being supported.
• Market Analysis: Staying up to date on cocoa market reports every month can help companies plan accordingly and re-evaluate where costs could be reduced in other ingredients.
• Innovation: Supplement 100% real cocoa with a chocolate flavor or extract to enhance the rich, decadent profile of your chocolate product while using less of the actual commodity.

We proudly use fair-trade, organic cocoa beans to create our robust, perfectly sweet and nutty chocolate flavors and extracts. Reach out to us today for more information on our premium chocolate flavors and how Jogue can help you cut soaring cocoa costs while retaining flavor.

Resources:

1. https://www.cnbc.com/2024/02/08/cocoa-prices-surge-to-all-time-highs-as-bad-weather-hurts-west-africa-crop-yield.html
2. https://markets.businessinsider.com/news/commodities/chocolate-west-africa-cocoa-beans-supply-crunch-prices-suppliers-commodities-2024-2
3. McKeany-Flavell. “Cocoa and Chocolate Monthly Update”. 2024, Feb.
4. https://time.com/6291600/cocoa-chocolate-high-price-russia/
5. https://www.bloomberg.com/news/articles/2024-03-12/cocoa-rises-above-7-000-a-ton-for-first-time-in-new-york