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Global Cocoa Prices Surge to Record Highs Amid Supply Deficit

As the world grapples with the most severe cocoa supply deficit in decades, consumers may soon feel the impact of soaring cocoa prices, with experts warning of potential price hikes and adjustments in chocolate products.

Cocoa futures for May delivery reached an unprecedented intraday high of $10,080 per metric ton on Tuesday, reflecting a staggering increase of more than triple the cost over the past year. Despite a slight dip to $9,622 by day’s end, cocoa prices have surged by 129% in 2024 alone.

Industry leaders like Hershey CEO Michele Buck have acknowledged the challenge, emphasizing the importance of hedging strategies to navigate price volatility. The National Confectioners Association has also underscored efforts to collaborate with retailers to mitigate costs and uphold affordability for consumers.

However, experts caution that the industry’s ability to absorb rising costs may be limited. Paul Joules, a commodities analyst at Rabobank, warns that the worst may be yet to come, with the cocoa market facing systemic issues that defy quick fixes. The International Cocoa Organization forecasts a staggering supply deficit of 374,000 tons for the 2023-24 season, representing a 405% increase from the previous season.

Consumers could soon experience the repercussions, with potential outcomes including higher prices, “shrinkflation” with smaller chocolate bars, or adjustments in ingredient formulations to reduce cocoa usage, particularly in dark chocolate products.

David Branch of Wells Fargo’s Agri-Food Institute suggests that consumers might witness price spikes as early as Easter, fueled by steadily rising cocoa prices and manufacturing costs. Supply disruptions in key producing nations like Ivory Coast and Ghana, which collectively contribute 60% of global cocoa production, have been exacerbated by factors such as disease outbreaks, adverse weather conditions, and shifting agricultural priorities among farmers.

The recent surge in cocoa prices reflects a mix of panic among commercial buyers and speculation in response to the magnitude of the supply deficit. While speculators initially contributed to the rally, some have started to exit positions to secure profits.

The impact of escalating cocoa prices has already reverberated across the industry, with chocolate giants like Hershey facing challenges. Flat earnings projections for the year and declining stock prices underscore the urgency of addressing the ongoing supply crisis.

As the cocoa market grapples with unprecedented challenges, stakeholders are bracing for potential disruptions that could reshape the landscape of the global chocolate industry in the months ahead.