Ivory Coast and Ghana, the two largest cocoa producers in Africa, collectively contribute over 60% of the world's cocoa supply. However, recent trends indicate a significant decline in cocoa production, with Ivory Coast experiencing a 30% decrease compared to last year, while Ghana's output has reached a 13-year low. As a result, cocoa prices have surged, with Cocoa Futures trading at a 46-year high on November 30’2023. Since the beginning of the year, cocoa futures prices have increased by nearly 40%, reaching an unprecedented $5,874 per metric ton on February 8, 2024. In February 2024, cocoa prices stand at $5.56 per kilogram, a substantial rise from $0.26 in July 1965. As of July 2023, cocoa prices were recorded at $3.39 per kilogram.
Further details are provided below representing Cocoa prices in USD per Kilo:
Cocoa cultivation is highly dependent on weather conditions, with rain being crucial for growth. However, excessive rainfall during the blooming period can lead to flower loss and failed campaigns. This, coupled with the prevalence of black pod disease, has significantly impacted cocoa production in the West African chocolate-growing belt. The double blow of reduced quantity and compromised quality of cocoa crops further exacerbates the situation. Moreover, government payments to growers often fall short, discouraging investment in essential resources like fertilizers and pesticides. Additionally, illegal mining, locally known as 'galamsey', poses a significant threat to cocoa cultivation, with a growing number of farmers selling their lands to miners amid soaring inflation rates, reaching 26.4% in November'23. Analysts also anticipate that a third consecutive global shortage is imminent for the new season, especially with the potential exacerbation of conditions by an El Nino weather phenomenon.
The cost of Indian cocoa beans is going up along with global cocoa prices because India doesn't produce enough cocoa to meet its needs. So, it's importing more cocoa beans and products from other countries. When cocoa beans are imported, there's a tax of over 30 percent. To avoid this tax, many Indian chocolate makers are importing cocoa powder and cocoa butter duty-free from countries like Malaysia, Indonesia, and Singapore under special trade agreements. These countries get their cocoa beans from West Africa and make cocoa products to sell. But this year, the price of cocoa beans went up, making these imported cocoa products more expensive for Indian importers.
This price increase is majorly affecting chocolate makers who use only pure cocoa. But in India, most chocolate is made with compound chocolate, which uses vegetable fat that's available locally. And the price of this fat has dropped by half, balancing out the higher cost of cocoa beans. In the past year, cocoa production in India went up by about 5 percent to 29,792 tonnes, but it's still not enough to keep up with the demand for chocolate. So, India has been importing more cocoa products to meet this demand, with imports going up by about 16 percent to 128,654 tonnes in the past year.
Most of these imports are cocoa powder, followed by cocoa beans, cocoa butter, and fat. Last year, imports went over 100,000 tonnes for the first time ever. Some Indian companies, like Campco, as well as big international companies like Mondelez International (which makes Cadbury chocolates) and Nestle, buy cocoa beans from the Indian market. But because the price of cocoa beans has gone up, it's made imported cocoa products more expensive this year. Cocoa powder prices have also gone up by more than 15 percent to ~Rs 280 per kg, and cocoa butter has gone up by 8 to 10 percent to around Rs 430 per kg. However, this might not affect Indian importers right away because they usually have long-term contracts, but the affect is definitely going to be felt as sustained higher prices may have an impact on imports in the coming year.
References:
- https://www.theglobaleconomy.com/world/cocoa_prices/
- https://newscentral.africa/ghanas-cocoa-industry-under-threat-due-to-illegal-mining/
