Global Cocoa Prices Touched All-Time High in March 2024; Analysis of Indonesia’s Cocoa Sector

As is widely known, cocoa beans (after being fermented, dried, and roasted) are the key ingredient for various very popular chocolate-related snacks (confectionary and desserts) and beverages.

One only needs to take a look at chart A (on the previous page) to see that something highly unusual is going on in the international cocoa beans market. Cocoa futures closed at a level of USD $9,766 per ton on 28 March 2024, which is a whopping 172 percent increase compared to their price levels at the start of 2024. And therefore the chart shows an almost vertical line at the right side.

So, what exactly happened here? Well, the main factors that explain the skyrocketing global cocoa bean prices are poor harvests in the world’s top cocoa bean producing countries Ivory Coast and Ghana, where El Niño brought heavy rains last December, leading to crop damage and the spread of black pod disease. This consequently led to supply shortages. Other factors cited in global media that undermined cocoa bean production in the top two producers are extreme heat, aging cocoa trees, and illegal mining. And a more structural problem is that most cocoa bean plantations are run by (poor) smallholder farmers who lack the financial means to engage in proper maintenance as well as in investment in the rejuvenation of their cocoa trees.

There have also been reports that certain cocoa processing plants in Ivory Coast and Ghana cannot afford to buy cocoa beans, and therefore have stopped their activities. For example, Transcao, a major cocoa bean processor in Ivory Coast (controlled by the government of Ivory Coast), has halted the purchase of cocoa beans due to their high prices. This, too, is a problem because the world’s candy producers are unable to manufacture chocolate directly from raw cocoa beans. Instead, they depend on processors to transform cocoa beans into cocoa butter and liquor. And so, there now is a shortage of both raw and processed cocoa beans.

Officials in both Ivory Coast and Ghana recently stated that they have lowered their cocoa bean production forecasts for 2024. Therefore, we might see another year in which cocoa demand outpaces the cocoa supply. And if indeed so, it would then be the third consecutive year of a global cocoa bean shortage. Conditions in Ivory Coast and Ghana are crucial as these two countries together contribute nearly 60 percent to the world's cocoa production.

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