Cocoa Prices Reached All-Time Highs. What Does This Mean For Our Chocolate? | Big Business

Summary

In 2024, a global cocoa shortage caused by crop diseases, illegal mining, and extreme weather has led to record-high cocoa prices, severely impacting farmers in Ghana and Ivory Coast. Despite global price surges, farmers don’t benefit directly due to government-fixed prices. Chocolate manufacturers are adjusting by shrinking product sizes or adding alternative ingredients. As a result, consumers may face smaller chocolate portions and higher prices. This crisis is shifting the perception of chocolate from an everyday indulgence to a more precious luxury, with lasting effects on the cocoa industry and chocolate consumption worldwide.

Takeaways

• 😀 Cocoa prices surged to over $12,000 per metric ton in 2024 due to a severe global shortage, impacting the chocolate industry.
• 😀 Ghana and Ivory Coast, which produce over half of the world’s cocoa, are facing a significant disease outbreak known as swollen shoot virus, which is damaging crops.
• 😀 Cocoa farmers in Ghana are struggling with diseased plants, illegal mining operations, and a severe drought, all of which are contributing to lower yields.
• 😀 The swollen shoot virus is spread by mealybugs, causing cocoa plants to wither, and can take years for farmers to recover from by replanting trees.
• 😀 Illegal mining (galamsey) has taken over cocoa farmlands, with miners threatening farmers and destroying entire cocoa farms to search for gold.
• 😀 Farmers in Ghana are constrained by low prices for cocoa set by the country’s Cocobod, which limits their ability to benefit from higher global cocoa prices.
• 😀 Despite global cocoa prices rising, Ghanaian cocoa processors are struggling to afford beans due to the high cost set by Cocobod and the economic pressures at home.
• 😀 Many multinational chocolate companies are responding to higher cocoa costs by reducing the amount of cocoa in their products, downsizing packages, and using alternative ingredients.
• 😀 Smaller chocolate producers like Fairafric are pivoting to making chocolate drops for the European market to stay afloat, while also trying to promote local chocolate consumption in Africa.
• 😀 Consumers are already seeing changes in the products they buy, with smaller sizes, price increases, and fewer chocolate bars on shelves as a result of the cocoa crisis.
• 😀 Chocolate manufacturers are adapting by finding ways to cut manufacturing costs or adjust product offerings, but these changes could lead to higher prices for consumers in the long term.

Q & A

What is the main cause behind the sharp increase in cocoa prices in 2024?

The main cause of the sharp increase in cocoa prices in 2024 is a combination of factors, including a viral disease affecting cocoa plants, illegal mining operations overtaking farmland in Ghana, climate issues such as drought and excessive rainfall, and a global cocoa shortage.

What is the swollen shoot virus, and how does it affect cocoa production?

Swollen shoot is a viral disease spread by mealybugs that affects cocoa trees. It causes the pods to become diseased and often leads to the plant's death. Infected trees must be cut down and replaced, which can take years to grow new, fruitful trees.

How have cocoa farmers in Ghana been impacted by illegal mining activities?

Illegal mining operations, known as galamsey, have taken over cocoa farms in Ghana, often through intimidation or force. These miners destroy cocoa trees to dig for gold, which not only harms the environment but also deprives farmers of their livelihoods, leaving them without income.

Why have some cocoa farmers turned to the black market to sell their beans?

Some cocoa farmers have turned to the black market due to the low prices offered by Ghana's state-run Cocobod. On the black market, farmers can sell their beans for higher prices, as Cocobod's fixed price system does not benefit them when global prices surge.

What challenges do cocoa processors in Ghana face despite being closer to farms?

Cocoa processors in Ghana face the challenge of having to pay the same high prices for cocoa beans as foreign buyers. Despite being geographically closer to cocoa farms, the high costs have forced some factories to halt production due to unaffordability.

What role does Cocobod play in Ghana's cocoa industry, and how does it impact farmers?

Cocobod is a government-run organization responsible for regulating cocoa prices in Ghana. It sets the price that farmers receive for their beans, which can be beneficial when prices fall globally, but when prices rise, farmers do not benefit from the increase, leading some to sell beans on the black market.

How have multinational chocolate companies adjusted their strategies to cope with rising cocoa prices?

Multinational chocolate companies have responded to rising cocoa prices by shrinking product sizes, reducing the cocoa content in their products, and introducing new ingredients like nuts or caramel. Some companies have also focused more on non-chocolate products such as gummies and fruity candies to diversify their offerings.

What impact has the cocoa crisis had on smaller chocolate makers, such as Li-Lac Chocolates?

Smaller chocolate makers, like Li-Lac Chocolates, have been hit hard by the rising cocoa prices, facing a 62% increase in cocoa costs. To cope, they have had to absorb the higher costs without raising prices for consumers, but this may not be sustainable in the long term.

What is the significance of cocoa's historical role in Ghana's economy and its current challenges?

Cocoa has historically been a cornerstone of Ghana's economy, driving growth since the 1870s. However, despite being one of the largest producers of cocoa, Ghana still exports most of its beans, leaving it with only 5% of the global $200 billion chocolate industry. The current cocoa crisis further threatens Ghana’s ability to increase its share in the global chocolate market.

How are consumer expectations likely to change due to the cocoa crisis?

Consumers may need to adjust their expectations, as the cocoa crisis could lead to smaller chocolate portions, higher prices, and potentially less cocoa in products. Chocolate could become a more precious commodity, moving away from being an everyday luxury.