Valentine's Day Chocolates Get More Expensive Due to Global Warming... "Cocoa Prices Surge"

Drought Continues in West Africa Followed by Heavy Rain... Supply Shortage
Cocoa Futures Prices Surge 40% Compared to Previous Month

Due to abnormal weather caused by global warming, the price of cocoa, the main ingredient in chocolate, has surged, raising concerns about decreased profits for retailers ahead of the Valentine’s Day consumption boom. In West Africa, the main cocoa-producing region, drought last year followed by heavy rains and the spread of infectious diseases since the beginning of this year have led to expectations that the cocoa supply shortage problem will worsen further.

Chocolate (Photo by Asia Economy DB)

According to CNN on the 12th (local time), cocoa futures traded on the U.S. ICE Futures Exchange reached $5,583 per 10 tons (approximately 7.42 million KRW), a 30.6% increase compared to the beginning of the year. As a result, retail chocolate prices also rose, with CNN reporting that the price of fresh chocolate in North America increased by more than 13% compared to the previous year.

The reason for the sharp rise in cocoa prices is abnormal climate phenomena caused by global warming. Cocoa-producing countries in West Africa, such as C?te d'Ivoire and Ghana, which account for more than 60% of the world’s cocoa production, experienced severe drought last year, causing a sharp decline in production. Moreover, heavy rains since the beginning of this year have brought an infectious disease called black pod disease, further worsening cocoa crop conditions and continuing the price surge.

The government of C?te d'Ivoire temporarily suspended export contracts to prevent cocoa outflow as the price surge continued due to difficulties in cocoa crop conditions. CNN pointed out that losses caused by the deterioration of the cocoa supply chain situation amount to $529 million (approximately 703.3 billion KRW).

U.S. retailers who stockpiled large quantities of chocolate aiming for the Valentine’s Day boom are anxiously worried about potential sales declines. Billy Roberts, senior food and beverage economist at research firm CoBank, forecasted in a report earlier this month that “retail chocolate prices have risen about 17% over two years and will continue to rise.” This means that the rapid increase in retail chocolate prices could reduce chocolate futures in the short term.

For now, Valentine’s Day chocolate consumption this year is expected not to drop significantly compared to last year. According to a survey by the U.S. Confectioners Association, about 92% of Americans plan to purchase chocolates, candies, and other sweets as gifts for Valentine’s Day this year. The related industry expects to maintain or slightly exceed last year’s Valentine’s Day sales level of $4 billion.

However, if the cocoa price surge continues long-term, the industry is expected to face significant difficulties not only due to worsening sales but also due to sharply rising production costs. Michelle Buck, CEO of chocolate specialist Hershey, stated during a conference call held on the 11th that “cocoa is expected to limit profit growth this year,” and announced a workforce reduction of about 5% due to rising costs this year.