The price of cocoa, the main ingredient in chocolate, has surpassed $10,000 per ton for the first time in history. It has surged about 130% this year alone, showing a steeper increase than Bitcoin. As the cocoa supply shortage worsens, there are expectations that prices of chocolate and candy products will soon rise.
On the 26th (local time), May delivery cocoa futures on the New York Commodity Exchange (COMEX) traded at $10,080 per ton, up 4.5% from the previous session. This is an all-time high. Cocoa prices have more than tripled over the past year and have jumped nearly 130% since the beginning of the year. Protos, a blockchain-focused media outlet, described cocoa as "the new Bitcoin" and called it an "astonishing price rally."
This upward trend is attributed to poor weather and crop diseases causing harvest disruptions in West Africa, which accounts for about 60% of global cocoa production, including Ghana and C?te d'Ivoire. The International Cocoa Organization (ICCO) estimated the supply shortage for the 2023-2024 season at 374,000 tons, more than a 400% increase compared to the previous season. Additionally, hedge fund investors attracted by the recent sharp rise in cocoa prices have entered the market, further fueling the rally.
However, the market views much of the recent cocoa price surge not as speculative but as a result of supply shortages and panic buying by commercial purchasers. Paul Jules, a commodity analyst at Rabobank, told CNBC, "The worst is yet to come," and predicted that cocoa prices will remain high for some time due to the structural difficulty in resolving the supply shortage.
With Easter approaching, a period of increased demand for chocolate and candy, the industry is on high alert. Major chocolate companies such as Hershey, Lindt & Spr?ngli are strengthening Easter promotions focusing on products that do not contain chocolate.
Martin Hug, Chief Financial Officer (CFO) of Lindt & Spr?ngli, expressed concern about the unprecedented rise in cocoa prices during the earnings announcement earlier this month. Michael Buck, Chief Executive Officer (CEO) of Hershey, also revealed a hedging strategy to manage price volatility in an interview with CNBC last month. However, considering the cocoa supply shortage, there are evaluations that such hedging strategies have limitations. Ultimately, price increases for products are seen as inevitable.
David Branch, a manager at Wells Fargo, diagnosed that "considering the steady rise in cocoa prices and other manufacturing costs over the past year, there is a high possibility that chocolate and candy prices will surge this Easter." He also pointed out that cocoa production has been continuously declining over the past few years due to phenomena like El Ni?o. Analyst Jules also predicted that products might be released in smaller chocolate bar sizes or with adjusted cocoa content.
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