The decline in production has been the main reason for the rise in cocoa prices over the past 12 months.
- Cocoa prices are breaking records almost daily in London and New York, while bad weather has destroyed crops in Ghana and Ivory Coast.
- Demand for cocoa exceeds supply, with prices having doubled since the beginning of 2023.
- In West Africa, more farmers are reporting plant diseases that have led to the spread of black pod after heavy rains.
- For climate change news and analysis, visit: News24 The future of climate.
Cocoa prices are breaking records on an almost daily basis in London and New York as bad weather destroys crops in Ghana and Ivory Coast, causing supply shortages.
The two West African countries are the world's largest producers of goods used primarily to make chocolate.
“We haven't seen a harvest like this in 20 years,” lamented Siaka Shira, head of a trade cooperative of 1,500 farmers in Dibo, southern Ivory Coast.
“The rain has ruined our crops,” he told AFP in an interview.
Due to these poor harvests, demand far exceeds supply. Cocoa prices have more than doubled since the beginning of 2023.
At a time when major countries around the world are already suffering from high inflation, a sharp rise in prices risks threatening demand.
meteor rise
The cocoa market continued its meteoric rise this week.
On Tuesday, cocoa prices in London hit an all-time high of £4,248 (about R101,800) per tonne, while New York hit a 46-year high of $5,288 (about R101,800) per tonne.
“It seems only a matter of time before New York cocoa prices approach the all-time high of $5,379 per ton set in 1977,” said Commerzbank analyst Carsten Fritsch.
Last year's price surpassed its highest since 2011, when the market was reeling from concerns about the impact of post-election violence in Ivory Coast.
The decline in production has been a major factor in the price explosion over the past 12 months.
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In West Africa, more farmers are reporting plant diseases, especially after heavy rains, fueling the spread of black pod disease, which causes pods to turn black and rot.
Plants require a delicate balance of alternating sunlight and precipitation to grow.
Last July was particularly rainy in southern Ivory Coast, just as plants were blooming.
As a result, Ivory Coast's regulator, the Coffee and Cocoa Council, suspended the sale of export contracts.
“It's a very demanding crop. Last year's harvest was about 3,000 tonnes, but it will probably reach 1,900 tonnes,” Sila told AFP.
“But there are worse cooperatives that produce less than 200 or 300 tons.”
Cocoa shipments at Ivorian ports fell by 35% from October to the end of January compared to the same period last year, according to industry estimates.
El Niño threat
Producers are facing new disruptions as El Niño returns to threaten West Africa.
“This means that the cocoa market is likely to face a third consecutive year of supply shortages in the current 2023/24 planting year,” Fritsch warned.
El Niño is expected to cause extreme weather, causing drought in some areas and flooding in others, and last until April.
“Traders are worried about another shortening production year, but that sentiment is being dampened by the El Nino weather that is threatening crops in West Africa with hot and dry conditions,” said Jack Scoville, an analyst at Price Futures Group. “It's getting even higher,” he added.
Climate change is already a major challenge for farmers.
In Ghana, cocoa beans are grown in six regions: Eastern, Ashanti, Brong-Ahafo, Central, Volta, and Western regions.
However, declining soil fertility and fluctuations in rainfall have shifted production to the western part of the country.
The Abidjan-based International Cocoa Organization (ICCO) estimates that the world's top producer Ivory Coast and second-largest Ghana together accounted for almost 60% of the world's harvest in 2022/2023.