A
farmers
holds
cocoa
beans
while
he
is
drying
them
at
a
village
in
Sinfra,
Ivory
Coast,
on
April
29,
2023.
Luc
Gnago
|
Reuters
Consumers
could
start
to
see
the
effect
of
surging
cocoa
prices
as
the
world
faces
the
worst
supply
deficit
in
decades,
with
farmers
in
West
Africa
struggling
against
bad
weather,
disease
and
failing
trees.
Cocoa
futures
for
May
delivery
surged
to
an
all-time
intraday
high
of
$10,080
per
metric
ton
Tuesday
before
ending
the
day
down
0.3%
to
settle
at
$9,622.
Cocoa
has
more
than
tripled
in
cost
over
the
past
year
and
is
up
129%
in
2024.
Hershey
CEO
Michele
Buck
told
CNBC
last
month
that
the
company
has
a
hedging
strategy
to
manage
the
price
volatility.
The
National
Confectioners
Association
told
CNBC
in
an
email
that
the
industry
is
working
with
retailers
to
“manage
down
costs”
and
keep
chocolate
affordable
for
consumers.
Though
the
large
chocolate
companies
were
well-hedged
last
year
and
did
not
have
to
immediately
pass
on
high
prices
to
consumers,
there
is
only
so
much
the
industry
can
do
to
absorb
costs,
said
Paul
Joules,
a
commodities
analyst
at
Rabobank.
The
world
is
facing
the
largest
cocoa
supply
deficit
in
more
than
60
years
and
consumers
could
start
to
see
the
effect
at
the
end
of
this
year
or
early
2025,
Joules
said.
The
International
Cocoa
Organization
has
forecast
a
supply
deficit
of
374,000
tons
for
the
2023-24
season,
a
405%
increase
from
a
deficit
of
74,000
tons
in
the
previous
season.
“The
worst
is
still
yet
to
come,”
Joules
said.
Cocoa
prices
will
likely
remain
elevated
for
some
time
because
there
are
no
easy
fixes
to
the
systemic
issues
facing
the
market,
he
said.
Cocoa
in
past
12
months
Consumers
could
face
higher
prices
or
“shrinkflation”
in
the
form
of
smaller
chocolate
bars,
Joules
said.
Companies
might
also
adjust
ingredients
to
use
less
cocoa
in
some
products,
he
said.
The
worst
sticker
shock
would
come
from
dark
chocolate,
which
has
a
very
high
cocoa
content,
the
analyst
said.
David
Branch,
sector
manager
at
Wells
Fargo’s
Agri-Food
Institute,
said
consumers
could
see
higher
prices
as
soon
as
Easter,
which
is
on
Sunday.
“Given
that
cocoa
prices
and
other
manufacturing
costs
have
been
rising
steadily
over
the
past
year,
it
is
likely
consumers
will
see
a
price
spike
on
chocolate
candy
this
Easter,”
Branch
told
clients
in
a
research
note
this
month.
Cocoa
prices
have
been
on
a
tear
due
to
supply
disruptions
in
the
key
producing
nations
of
Ivory
Coast
and
Ghana,
Joules
said.
The
two
countries
represent
about
60%
of
global
cocoa
production.
Crops
have
been
hit
by
black
pod
disease
and
swollen
shoot
virus
and
many
trees
are
past
their
maximum
yield
potential
because
there
has
not
been
a
major
round
of
planting
since
the
early
2000s,
Joules
said.
Heavy
rains
exacerbated
the
disease
issues,
Branch
said,
and
the
El
Niño
weather
phenomenon
has
also
led
to
drier
conditions
resulting
in
lower
cocoa
yields
in
previous
years.
Seasonal
harmattan
winds
were
more
extreme
this
year,
also
affecting
crop
yields,
Branch
said.
Farmers
in
Ivory
Coast
are
increasingly
exiting
cocoa
production
for
more
lucrative
crops
such
as
rubber,
Joules
said.
The
governments
of
Ghana
and
Ivory
Coast
set
fixed
prices
for
the
farmers
at
the
start
of
the
season
so
they
are
not
benefiting
from
the
currently
rally,
the
analyst
said.
The
recent
runup
is
likely
due
to
panic
among
some
commercial
buyers
rather
than
market
speculation,
Joules
said.
Buyers
see
the
magnitude
of
the
supply
deficit
and
are
trying
to
secure
the
cocoa
that
is
available,
according
to
the
analyst.
Speculators
contributed
to
the
early
leg
of
the
rally
last
year
as
they
bet
on
higher
prices
by
increasing
their
long
positions,
Joules
said,
but
they
have
been
exiting
those
positions
this
year
to
book
profits.
The
spike
in
prices
has
hit
chocolate
giant
Hershey,
which
sees
flat
earnings
for
the
year.
Hershey
stock
is
down
about
22%
over
the
past
12
months,
while
Nestle’s
Switzerland-listed
shares
have
shed
about
13%
during
the
same
period.
