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.