Cocoa Crisis - Why Chocolate Prices Are Set To Soar: Africa Amplified

Summary

This month's Africa Amplified focuses on the challenges facing Africa's soft commodities, particularly cocoa and corn. Record cocoa prices and supply shortages are impacting global chocolate costs, while climate change threatens West Africa's cocoa harvests. South Africa's corn production faces a decline due to adverse weather. Political developments, such as upcoming elections and changes in government, are also discussed, highlighting their potential economic implications.

Takeaways

• 🍫 The future of cocoa is under threat due to record-breaking prices and chronic supply shortages, which are expected to push up global chocolate prices.
• 🌍 Soft commodities, particularly cocoa, are facing challenges that could impact markets and consumers worldwide.
• 🏛️ South Africa's upcoming democratic elections are highly anticipated, with business leaders emphasizing the need for stability and effective policy implementation.
• 🌾 South Africa may experience its smallest corn harvests in five years due to unfavorable weather conditions, affecting food security and potentially leading to higher prices.
• 🇿🇦 Zambia is close to reaching restructuring deals with some of its remaining commercial creditors, after being the first African country to default during the pandemic era.
• 🇸🇳 Senegal's new president has appointed a populist opposition leader as prime minister, with expectations to address economic and social issues, including high unemployment and living costs.
• 🚀 Senegal's economy is growing at a slower pace, and the new administration is expected to focus on renegotiating deals for oil and gas exploration and addressing the country's expanding debt stock.
• 🌳 The European Union's new regulation to ban imports of cocoa beans grown on deforested land could impact the cocoa industry and potentially limit output.
• 🌍 Climate change and geopolitical tensions are two major megatrends affecting agriculture, with El Nino conditions expected to drive climate variability.
• 🥜 The southern African region is expected to face corn shortages, with countries like Zambia, Malawi, and Zimbabwe announcing a state of disaster and potential reliance on deep-sea imports.
• 🍊 Egypt's citrus exports might be redirected more towards Europe due to geopolitical issues affecting the Suez Canal, impacting trade routes and market accessibility.

Q & A

What is the main focus of this month's Africa Amplified show?

The main focus of this month's Africa Amplified show is on soft commodities, specifically cocoa, and its impact on global chocolate prices due to record-breaking prices and supply shortages.

What challenges are affecting the cocoa market in Africa?

The cocoa market in Africa is facing challenges such as bad weather, crop disease, and aging cocoa trees, which are leading to significant reductions in harvests in major producing countries like Ivory Coast and Ghana.

How do the political situations in South Africa and Senegal influence their respective economies?

In South Africa, the upcoming elections and the possibility of a coalition government are causing uncertainty about policy implementation and economic direction. In Senegal, the new president's appointment of a populist opposition leader as prime minister is expected to bring changes in economic policies, including renegotiating deals with international partners for oil and gas exploration.

What are the implications of the European Deforestation Regulation (UDR) on the cocoa industry?

The UDR requires importers of cocoa into the EU to prove that the cocoa was not grown on deforested land. This regulation aims to curb deforestation and could lead to higher costs for consumers as it might limit the supply of cocoa and increase the price of chocolate.

How is Zambia's debt restructuring process progressing?

Zambia has reached agreements with some of its lenders to restructure $6.3 billion as part of a larger $10.1 billion debt. The country is now in negotiations for the remaining $3.3 billion, with some close to being finalized.

What are the potential impacts of the current climate conditions on South Africa's corn harvest?

The hot and dry weather in South Africa is damaging the corn crop, which is a key staple in the region. This could lead to the smallest harvest in five years, affecting food security and potentially increasing prices due to a regional shortage.

How do geopolitical tensions affect the global trade of soft commodities?

Geopolitical tensions can disrupt the movement of goods between key markets, such as the Suez and Panama Canal disruptions. This can affect the timing and quantity of products reaching certain markets, leading to price variability and potential shortages.

What is the expected outcome for the global chocolate market given the current cocoa crisis?

The global chocolate market is expected to face a deficit, leading to higher prices for consumers. Manufacturers like Hershey and Cadbury have warned of increased costs, and experts suggest that a significant reduction in chocolate consumption is needed to balance the market.

How might the new administration in Senegal address the country's economic challenges?

The new administration in Senegal is expected to focus on job creation, addressing high living costs, and renegotiating deals related to oil and gas exploration. They will also be keeping a close eye on the country's expanding debt stock and aiming to build a local industry by transforming more of the country's resources within Senegal.

What are the potential changes in consumer behavior due to rising chocolate prices?

Rising chocolate prices may lead to a change in consumer behavior, with people potentially consuming less chocolate and turning to other snack foods as main competitors. This shift could be necessary to bring the market back into equilibrium.

What other commodities besides cocoa are affected by the current climate and geopolitical conditions?

Besides cocoa, other commodities such as corn (maize) and citrus from Egypt are affected by climate conditions and geopolitical tensions. The variability in climate can impact crop yields, while geopolitical issues can disrupt trade routes and market access.

Outlines

00:00

🌍 Introduction to Africa Amplified and Focus on South African Elections

The video begins with Jennifer introducing Africa Amplified, a monthly show highlighting African stories. The focus this month is on soft commodities, particularly cocoa, and its threatened future due to record-breaking prices and supply shortages. The discussion then shifts to the impact on southern Africa's staple crops and the potential for South Africa's smallest corn harvest in five years. The segment concludes with a look at South Africa's upcoming democratic elections, emphasizing the importance of stability and policy execution for investor sentiment. Business leaders express their views on the elections and the potential for a coalition government, with concerns about its functionality and the need for change from the current economic and social crises.

05:02

🇸🇳 Senegal's New President and Economic Challenges

The video continues with a discussion on Senegal's new president, Bashiru Dumaine, and his appointment of opposition leader Ousmane Sonko as prime minister. This surprising move comes after a landslide victory and the challenges of a slowing economy, high unemployment, and widespread frustration among the population. The new administration is expected to address these issues, renegotiate deals for oil and gas exploration, and manage the country's expanding debt stock. The video also touches on the market's reaction to the quick election and the need for the new government to prioritize Senegal's interests while balancing investor rights.

10:03

💰 Zambia's Debt Restructuring and Economic Recovery

The video then shifts to Zambia's efforts to reach restructuring deals with its remaining commercial creditors after becoming the first pandemic-era defaulter in 2020. An agreement has been reached to restructure $6.3 billion of the $10.1 billion debt, with the last two signatories, China and India, signing in February. Discussions on the remaining $3.3 billion have begun, and there is optimism about progress. The video highlights the importance of the 20 Common Debt Framework and the criticism it has received. Other countries, such as Ethiopia, are also dealing with defaults or debt distress and may follow Zambia's lead.

15:04

🍫 Rising Cocoa Prices and Global Impact

The video addresses the surge in cocoa prices due to bad weather and crop disease in West Africa, which has significantly impacted cocoa trees and harvests. Ivory Coast and Ghana, the world's top cocoa producers, are expecting substantial output declines. This has led to cocoa processing plants facing shortages and the risk of shutdowns. The increase in bean costs has more than doubled in three months, leading to higher chocolate prices for consumers. The video also discusses the European Union's new rules banning imports of beans grown on deforested land, which could further limit output and lead to a potential chocolate market meltdown without long-term structural changes.

20:07

🌽 South Africa's Corn Harvest and Regional Implications

The final segment of the video focuses on South Africa's corn harvest, which is expected to be the smallest in five years due to dry, hot weather. The implications for food security and inflation are explored, with the potential need for deep-sea imports to service southern hemisphere demand. The video also touches on the impact of geopolitical tensions on trade, such as the Suez Canal disruption affecting Egyptian citrus exports. The discussion concludes with a look at the broader trends affecting agriculture, including climate change and geopolitical disruptions, and the potential for increased price variability due to ongoing uncertainties.

Keywords

💡Cocoa

Cocoa is a key cash crop and the primary ingredient in chocolate. In the video, it is highlighted as facing threats due to record-breaking prices and chronic supply shortages, which are causing global chocolate prices to rise. The future of cocoa is a central theme, with discussions on how weather conditions and crop diseases in West Africa are impacting cocoa production and the potential implications for the chocolate market.

💡Soft Commodities

Soft commodities refer to agricultural products that are grown, rather than mined or produced from livestock. In the context of the video, soft commodities like cocoa and corn are under the spotlight due to various challenges affecting their supply and prices. The term encompasses a broad range of products that are crucial to the global economy and consumer markets.

💡Supply Shortages

Supply shortages occur when the demand for a product or commodity exceeds the available supply. In the video, this concept is critical as it explains the rising prices and potential scarcity of cocoa and other commodities. The imbalance between supply and demand is a major factor influencing market dynamics and consumer prices.

💡Global Chocolate Prices

Global chocolate prices refer to the cost of chocolate products around the world. The video emphasizes how factors like cocoa supply shortages and climate change are driving up the prices of chocolate globally. This has implications for both consumers, who may face higher costs, and manufacturers, who must navigate increased raw material costs.

💡Democratic Elections

Democratic elections are processes through which citizens of a country vote to elect their leaders and representatives. In the video, the upcoming South African elections are a focal point, with discussions on the potential outcomes and their implications for the country's political and economic future. The term encapsulates the essence of democratic governance and the importance of a stable political environment for investor sentiment and economic growth.

💡Coalition Government

A coalition government is a form of government in which multiple political parties come together to form a ruling body, often to overcome the challenge of not having a single party with a majority. In the video, the possibility of a coalition government in South Africa is discussed, with insights into how it might impact the country's governance and policy implementation. The term is significant as it reflects the complexity of political dynamics and the potential for change in a country's direction.

💡Economic Crisis

An economic crisis refers to a period of severe difficulty in the functioning of an economy, often characterized by high unemployment, low economic growth, and financial instability. In the video, the term is used to describe the challenges faced by South Africa and other countries, with discussions on the role of government and policy in addressing these issues. The concept is central to understanding the broader economic context and the need for effective solutions.

💡Climate Change

Climate change refers to significant, long-term changes in the patterns of temperature, precipitation, and other atmospheric conditions on Earth. It is a key driver of various environmental and economic challenges, as discussed in the video. The impact of climate change on agriculture, particularly on crops like cocoa and corn, is a major theme, highlighting how weather conditions can disrupt food production and supply chains.

💡Geopolitical Tensions

Geopolitical tensions refer to the political conflicts and rivalries between nations or regions that can affect international relations and trade. In the video, geopolitical tensions are discussed in the context of how they disrupt trade and the movement of goods, such as the impact of Suez Canal issues on Egyptian citrus exports.

💡Trade Disruptions

Trade disruptions occur when there are obstacles or interruptions in the normal flow of international trade. These can be caused by a variety of factors, including political conflicts, natural disasters, or regulatory changes. In the video, trade disruptions are highlighted as a significant factor affecting the availability and pricing of commodities like cocoa and corn.

💡Food Security

Food security refers to the state of having reliable access to a sufficient amount of affordable, nutritious food. In the video, the concept of food security is discussed in the context of climate change and its impact on crop production, which can threaten the ability of regions to feed their populations. The term is crucial for understanding the broader implications of agricultural challenges and the need for sustainable solutions.

Highlights

The future of cocoa is under threat with record-breaking prices and chronic supply shortages.

Global chocolate prices are set to rise due to the cocoa crisis.

South Africa's corn harvest faces being the smallest in five years due to weather conditions.

Business leaders emphasize the importance of stability and policy execution for investor sentiment.

South Africa's major parties discuss the complexities of a potential coalition government.

Senegal's new president appoints opposition leader as prime minister, signaling a potential shift in government direction.

Zambia is close to reaching restructuring deals with some of its remaining commercial creditors.

Ethiopia faces a tough negotiation with the IMF following its default in December.

Cocoa prices are trading at near historic highs due to weather and crop disease in West Africa.

Ivory Coast expects a significant drop in cocoa output, around 25% this season.

Ghana's cocoa output is set to drop by 35% compared to the last season.

The European Deforestation Regulation aims to prevent the EU from contributing to deforestation related to cocoa.

The cocoa market may require demand destruction to bring it back into equilibrium.

South Africa's democratic elections are expected to be highly contested, with business leaders expressing mixed views on coalition governments.

The impact of the EU Deforestation Regulation on cocoa exports and consumer prices in Europe is discussed.

Agriculture faces challenges from climate change and geopolitical tensions, affecting trade and business practices.

Egypt's citrus exports may be redirected towards Europe due to geopolitical disruptions in the Suez Canal.

Transcripts

Good morning. I'm Jennifer up a soldier.

And you're watching Africa amplified Bloomberg's monthly show, bringing

Africa stories to the world. This month, we're putting the spotlight

on soft commodities and one of the continent's most important cash crops,

Cocoa. As you can see right there, the future

of cocoa is under threat with record breaking prices and chronic supply

shortages rattling the market and set to push up global chocolate prices for a

number of consumers. We're also going to tell you why similar

factors are affecting southern Africa's most popular staple and how this could

lead to the smallest corn harvests in South Africa in five years.

But first, let's dive into the stories and issues on the agenda affecting the

markets with our reporters from across the continent.

We're going to take you to Dakar in the west and Kigali in the east.

But let's start here in Johannesburg as we build up to what's expected to be

South Africa's most hotly contested democratic elections.

We've been spending the past few weeks speaking with business leaders to gauge

their views ahead of the May 29th vote. Here is some of their sound.

What will drive investor sentiment is a level of stability in the ability to

implement and execute on policy and a stable coalition environment.

Coalition governments will at the very least mean a change of direction if the

country continues to implement its plans on electricity, logistics, crime,

corruption. One could see growth faster than 1.2% in

the medium term. So there is a lot of expectation for the

election and the country is resilient. And often I would say the narrative is a

lot worse than the reality. All right.

So those were some of the business leaders we've been speaking to while

analysts expect a coalition government. We've also been speaking to South

Africa's two biggest parties and they're telling us it may not be so simple.

Take a listen. When the time is right, you never work

on the best of your worst case scenario. Right.

Okay. Is there a consideration, though,

considering what we're seeing from the day, from the smoke, from all of these

other smaller parties? Is there a preferred outcome outside of

our experience? Is that in South Africa, society is not

ready for coalition. They don't move to local government

where they've started every club. I was there in Pretoria is a coalition.

They're led by the day for eight years. I have no idea.

For two days now, two days they don't have water.

And and I blame half day because it is leading.

But it shows the functionality of coalitions.

We are not ready for it. We are not in one not in Sweden, one not

in the Nordic countries. So then what would that mean for South

Africa if if there were to be a coalition government voted into office,

there will be a coalition if it is there.

But I know that is not optimally working.

We've seen it in local government. Right.

So you don't think it would work on a national level?

It will not go ahead because they will tell the president every two months and

change and millions die every one month. And that doesn't work in real life.

My job is to get the ANC out of government.

I don't think we are going to solve the country's problems by having the same

people who are responsible for the economic crisis, the social crisis and

the infrastructure crisis sitting around the table.

We've got to change him. And that's why the multi-party charter

has said we will not do deals with the ANC.

What if we see a scenario where the ANC still is somewhat in the majority?

Is the DA going to rule out working? We will go back to the multi-party

charter and we will decide on what the best option for it.

Maybe a minority. Maybe we could form a minority

government as a multi-party charter. I just think there's too many unknowns

at this stage to say. My focus is on getting the ANC way below

50% and getting a new set of people around the table so we can get our

country off this low growth, high debt and employment trajectory.

And don't miss our next episode of Africa Amplified, which will be a South

African election preview special. That is, of course, on the first Friday

of the month, May 3rd for next month. All right, Let's stick with the

election's theme, though, for this month's episode.

And Senegal's new president has named a populist opposite opposition leader

Ousmane Sonko as prime minister. The appointment came just hours after

Bashiru Dumaine fire was sworn in as president following his landslide

victory over the ruling party candidate in the March 24th ballot.

Sonko is expected to name a government in the coming days.

Luckily for us, we have Bloomberg's Catarina Hajji, who's been following

events, and she's joining us from Dakar. So, Catarina, thank you so much for

getting up with us. So based on FIFA's first public

announcement, I mean, what should we expect from the new president?

This was really highly, highly surprising how quickly this election

happened. Indeed.

I mean, fights win in the first round over the ruling party candidate was

unexpected and now is taking over an economy that's growing at a slower pace

than in past years, just over 4% last year compared to an average of 5%.

There's widespread frustration among Senegalese of a lack of jobs and high

living costs, pushing some young Senegalese to seek better opportunities

elsewhere. Often a fatal journeys by boat trying to

reach Europe and face immediate concerns will be addressing those grievances,

which are also the same issues that swept into power.

He's expected to follow through on a promise to renegotiate deals with

Senegalese partners for exploration of oil, offshore oil and gas.

And finally, he signaled he will be keeping a close eye on Senegal's

expanding debt stock. The country is at moderate risk of

distress, but public debt is still estimated at over 70% of GDP.

So considering Senegal's needs, official unemployment is currently at over 20%,

it's likely much higher and one third of the population of 18 million lives in

poverty. The grace period for a phased

administration will be quite short. Very short.

And I mean, especially when you consider, Catarina, what we saw from the

markets in reaction to this quick election.

I mean, in terms of investors, what do you think is really the key focus for

them moving forward in this new administration?

MI5 has already sought to reassure investors that Senegal will respect its

commitments to its partners and that their rights will be protected.

That said, Vice Focus will be on Senegal's interests.

His In his first major policy announcement on Wednesday, he called an

audit of the oil, gas and mining sectors is also expected to favour the

Senegalese private sector, while international partners could be asked to

contribute more to developing the country.

Five months to build a local industry, transforming more of the country's

resources in Senegal as exposed as opposed to exporting raw materials.

But he likely won't do is interfere with the time plan for gas projects that has

already seen multiple delays. First, gas from a 4.8 billion gas field

offshore being developed by BP and Kosmos is expected later this year.

And part of that, revenues already baked into the budget for 2024, with IMF

hinting growth of 8% this year and double digits next year on that project

starting on time. Wow.

And we know you've been following this very closely.

So I appreciate you getting up early for us.

Bloomberg's Catarina Hajji in Dakar for us.

Catarina, thanks so much for waking up. All right.

Let's turn from politics to debt now. Even though, of course, they are

interrelated, as we just talked about. And Zambia says it's close to reaching

restructuring deals with some of its remaining commercial creditors.

It became the continent's first pandemic era defaulter in 2020.

So let's bring in Bloomberg's Indira Okwonga, who's been following the story

for us from Kigali. So, Indira, tell us about the debt deals

Zambia has struck. This is significant.

Well, Jim, they have reached an agreement with some of the lenders to

revamp $6.3 billion as part of the larger $10.1 billion that they owed to

some of their creditors. They've reached a preliminary agreement

in June, signed a memorandum of understanding in October.

And the last two signatories, which are China and India, put ink to paper in

February. Of the remaining $3.3 billion.

The National Treasury says that negotiations have begun on some, while

others are almost getting there. If we zoom in on Eurobonds, the odd 3

billion but because they defaulted, interest accrued and now the loan stands

at about $3.89 billion. They reached an agreement with some of

the investors to write off $840 million. So even though the group of 20 common

debt framework has been criticized, that too slow and almost painful by the

president of Zambia, the country is now beginning to make headway.

Yeah, it's been very interesting to see sort of this back and forth for Zambia.

But, you know, they're not the only country that's really dealing with this

that's either defaulted or in debt distress and therefore is looking to the

common framework. I mean, can you talk us through some of

the other countries that could potentially follow?

The most recent defaulter is Ethiopia, and they defaulted in December.

And following this default, they were to reach a tough level agreement with IMF

in March, but they did not do that. And so the Paris Club extended them an

extra three months to reach a preliminary deal with the IMF.

And so between now and that time, we are going to see Ethiopia having

conversations with the IMF on how to raise money, how to spend money, how to

finance the $11.4 billion gap. And in between that time, a lot will be

happening. IMF money does not come for free.

It comes with conditionalities. We are likely to see them being asked to

scrap of subsidies and also liberalize their effects market.

The beer is currently overvalued in the official market and valued at half the

price in the parallel market. So this is the changes that we're likely

to see in Ethiopia. In the meantime, people contending with

an economy that is really, really hard. Absolutely.

Thanks so much, Indira Ganga, for always following this story for us in Kigali

for us. Thanks, Indira.

All right. Coming up, cocoa prices trading at near

historic highs. We're going to discuss how it impacts

producers in Africa and consumers of chocolate across the world.

Bad weather and crop disease in West Africa have impacted already aging cocoa

trees, decimating harvests. Ivory Coast, the world's top cocoa

producer, now expects output to slump around 25% this season.

In neighbouring Ghana, the second largest grower being output is set to

drop by 35% compared with the last season.

And in both countries, cocoa processing plants are facing shortages and some run

the risk of shutting down. Barry Callebaut, the world's largest

bulk chocolate maker, expects the global deficit to continue while manufacturers

Hershey and Cadbury have warned of higher prices for consumers, with

chocolate makers scouring for supply. The cost of beans has more than doubled

in less than three months. In March, cocoa futures surged above

$10,000 per tonne for the first time. Yet farmers have struggled to benefit

from these record prices, even after winning a higher pay deal.

That's because West African growers are paid set prices imposed by tight

government regulation and even the economies of Ivory Coast and Ghana won't

benefit as they sell most of their crop a year before the harvest starts.

They could potentially sell at current prices on the spot market, but they've

run out of stock amid the surging demand.

New European Union rules banning imports of beans grown on deforested land also

risks limiting output even more. All of this means a meltdown in the

chocolate market could be looming unless there are long term structural changes

in place. That's right.

And cocoa expert Stephen Watt, Reg from the Tropical Research Services says he's

never seen anything like the recent moves in prices in over four decades of

work. I asked him where he thinks the market

is headed next. We basically need significant demand

destruction in order to bring the market back into equilibrium.

And the problem in the cocoa market is that, you know, industry have

significant forward price cover, so the current prices won't be passed on to the

consumer until later in the year. And basically, we need people to eat

less chocolate. Well, I feel like that is very unlikely

that that's going to happen. But how that is this going to trickle

down to the consumer? Oh, you know, we've seen chocolate

prices rise in the last 12 to 18 months ahead of inflation, but not massively

So. I think over the next 12 months, we're

going to see prices of chocolate confectionery increase much more

significantly relative to other snack foods who are the main competitors for

confectionery. And that will instigate a change in

consumer behaviour, which is what we need.

And in addition to drought and disease ravaging West Africa's cocoa crops and

sending prices upwards, traders and manufacturers are now looking at what

impact EU deforestation regulations could have on exports into Europe.

Just another thing to think about. So joining us for more is bloomberg,

EMEA and Asia soft commodities reporter Mumbai Kitao, who has, I think one of

the sweetest jobs in the company. But maybe we can talk about that later.

So Mumby, can you run us through the details of the UDR and really what the

implications are for the industry? Yeah.

So you are the European Deforestation Regulation.

It's not a very new regulation. There has been talks about it and it was

adopted last year around June. Now it will come into force at the end

of this year, December 30th. And what essentially that requires of

any importer of cocoa into the EU is that they have to show that the cocoa

that they are bringing in into the bloc was not grown on deforested land.

That has to be done starting next year.

But I think the challenge for them is that they have to collect GPS

coordinates or polygon maps for each and every farm that they want to bring cocoa

from or source cocoa from. I think for regulators and I mean for

traders who I've spoken to, the easiest way they put this is the objective of

the regulation is to make sure that EU is not complicit when it comes to

matters of deforestation. Cocoa has been in the news for bad rap

over deforestation. We did.

There was a study not at Bloomberg, but there was a study that was done between

2020 20 and it showed that forests around the size of twice the size of

London had been cleared between those periods.

So the aim of this regulation is to make sure that deforestation doesn't

continue. We've seen consumers who are more

conscious and cautious about the kind of products that they consume.

As a consumer, you don't want to have chocolate that is linked to

deforestation. You don't want to have chocolate that is

linked to child labour. So there's been immense pressure on the

EU to make sure that it doesn't contribute to drift to deforestation for

the last couple of years, according to Bloomberg Research.

EU alone has contributed to 7.5% of deforestation related to cocoa.

Wow. And I mean, Mumbai, we just heard from

Stephen talking about how really the change that's needed is consumers need

to consume less chocolate. But, I mean, if we actually see this UDR

regulation go through, I mean, what's the impact then for consumers and for

some of these commodity prices in Europe and elsewhere?

As we are already seeing that. So essentially, cocoa is traded in two

places in New York and in London. And if you see in the last couple of

months, prices that are in New York are much higher than the price.

I mean, prices in London are much higher than the prices in New York.

So you can see already there's a price impact for cocoa that is traded in

London. What that means is that it will be more

expensive for consumers in Europe to satisfy that chocolate craze.

So everyone loves chocolate, at least for me.

I know I love chocolate. So it will just get more expensive as

you go to satisfy that. And you've heard from Steve, these

prices will come on in the next 212 months.

Yeah, and I know luckily for you, you get to stay on this and hopefully buy

more chocolate for us. So we might have to visit you soon.

But Bloomberg's one big store in London. Thank you so much for your reporting and

your analysis this morning. All right.

Coming up, South Africa's corn harvest could be the smallest in five years as

dry, hot weather damages the key crop at a crucial time.

We're going to explore the implications for food security and inflation next.

This is Bloomberg. Oh.

And sticking with our story for today, it's not just cocoa seeing soaring

prices. Hot, dry weather across South Africa's

main summer crop growing regions is hurting the outlook for key soft

commodities. So joining us now in studio is Marlene

Lowe. She is a senior agriculture economist at

ABSA Agribusiness and has a new report out right now.

So, Marlene, thank you so much for joining us.

So I want to start with what we saw in the report.

Your team says we went from pandemic era agriculture, agricultural issues to even

bigger megatrends that we're now seeing. Can you just walk us through a few of

those? Yes, I think the two main ones are

climate and then obviously disruptions related to trade and the way we do

business as a result of geopolitical tensions and factors related to

politics. So in terms of climate, I think the

story has been there around autumn dry conditions, which we've just seen in the

cocoa segment. And then in terms of geopolitics, it's

really around moving cargo between key markets.

So the Suez Canal disruption, the Panama Canal disruptions and how that affects

the timing of products in markets, but also in a lot of cases, less products

reaching certain markets. Is it northern versus southern

hemisphere that's having the issues or are we seeing this happening even

throughout the continent here? Yeah.

So in terms of climate, I think in 2023 we really saw a lot of climate records

being shattered and the southern hemisphere were relatively sheltered

from that, given the La Nina conditions that prevailed.

This condition this year, the El Nino conditions really driven the point home

that we are dealing with a highly variable climate.

And I think the intensity of the El Nino event just just emphasizes that it's

something that we need to to to keep in mind.

So so then what are the biggest commodities then that are going to be

affected that you and the team are looking at?

So for now, I think the main focus is on on corn or maize.

So in the southern African region, White may specifically is a key staple.

And what we've seen is that the market is currently pricing in that we'll

probably need to to rely on deep sea imports to service the southern

hemisphere demand. We've seen Zambia closing markets and

Zimbabwe, Malawi and Zambia announcing a state of disaster.

So we do foresee that there would be import requirements

from those countries which would need to be channeled through South Africa into

those markets. The South African harvest is still

projected to service our local demand, but regionally we will be short.

And you also talk about Egypt and citrus from Egypt, right?

Yes. So the issues in Egypt

is disrupted by the geopolitics, Right. Political conditions in the Middle East.

So the Suez Canal issues, I think as bearing on where Egyptian citrus would

go this season. Egypt has emerged as a major citrus

exporter over the last couple of years, huge expansions in area.

And I think traditionally this would have been spread across various markets

given the disruptions in the Suez Canal. This might be concentrated more towards

Europe this year because far eastern markets would be difficult to reach.

So very quickly, Mali and before we go, if we're seeing a more volumes entering

the market, does are should consumers expect higher prices to continue for the

foreseeable future? Yes, I think price variability is the

name of the game given the uncertainty. We'll see how disruptions play out and

how market windows are affected by by these issues.

All right. But we went through a few of those,

including cocoa and corn, Mali. And thank you so much.

That's more Liana Lowe, the senior agriculture economist at ABSA

Agribusiness. Thank you so much.

And that is all we have time for today. Join us again next month and every month

if you can. From me, Jennifer is off a soldier.

It's good bye. Thanks so much for joining us.