Cocoa Price Surpasses Six Thousand Dollars, Further Increases Expected. Confectioners Announce Price Hikes

Cocoa was traded today at a price of six thousand dollars, which is the highest recorded point. This is a significant increase as the price in September 2022 was just over two thousand dollars. Cocoa has become the best-performing commodity on the stock market in recent years due to this price surge.

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The price of cocoa beans skyrocketed in the second half of 2023, and the trend continued into the beginning of this year. According to Trading Economics data, cocoa has increased by 1803 USD/MT or 42.97 percent since the beginning of 2024, based on trading in contracts for difference (CFD) that track the reference market for this commodity.

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Cocoa is expected to trade at around six thousand dollars by the end of this quarter, according to global macro models from Trading Economics and analysts’ expectations. Looking ahead, it is estimated that it will trade at 6346.11 in 12 months. However, surprises are possible as this increase has also surprised analysts.

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Additionally, the latest data from Trading Economics shows that Côte d’Ivoire has reduced its supply by 39 percent from October 2023 to February this year, compared to the same period last year. A similar trend has been observed in Ghana, where a 35 percent drop in supply was recorded for the period from January 31 to September 1, 2023.

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The increase in cocoa prices on global exchanges is occurring due to unfavorable weather conditions in West Africa, where more than 60 percent of the world’s cocoa production is located. This area is currently affected by the meteorological phenomenon El Niño. The problem lies in the sensitivity of the cocoa plant to hot weather conditions. Dry and extremely hot weather can also contribute to the development of soil diseases, which is detrimental to current and future crops. Chocolate manufacturers have felt the increase in cocoa prices first, and then consumers may follow.

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Long-term Contracts

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– Although we have been feeling the price increase for some time, we have been doing everything possible to internally absorb this increase, but given the current indicators, we are also forced to adjust product prices for our customers and consumers minimally to ensure business stability. Our imperative will continue to be producing well-known products of premium quality and traditional recipes, and we hope that the situation with cocoa will stabilize soon, say the largest domestic confectioner Kraš.

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Similar thoughts are echoed at Zvečevo. – Considering the market movements of the key raw material in the last four months, it is inevitable to expect corrections in selling prices. We want to emphasize that the final price of the product is not solely a product of the increase in manufacturers’ prices but also of other stakeholders involved in forming the final price for consumers, they state from Zvečevo.

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However, there are those who hope that there will be no need to increase the prices of cocoa products. – For now, we do not plan to raise product prices. When and if the time comes, we will try to justify the increase by improving product quality, says Alemka Lončar, director of the chocolate factory Hedona from Križevci.

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Chocolate manufacturers can somewhat secure themselves by entering into long-term contracts for raw material purchases, which allows them, as they say, a short preparation period for the new conditions.

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– Zvečevo, in accordance with its business policies, strives to implement healthy procurement policies for key raw materials. These processes include, among other things, entering into long-term contracts that serve to ensure the availability of raw materials and ensure their standard quality. Long-term contracts, in addition to the above, where possible, allow for a short adjustment period to newly established price conditions, thus ensuring partial leveling of negative price impacts in the short term, emphasizes Mirta Duić, marketing and production manager at Zvečevo.

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Current cocoa prices are at historical levels and significantly impact manufacturers’ operations and consequently the prices of confectionery products. – Unfortunately, Zvečevo has no ability to influence these events and is forced to adjust its business policies to these new and previously unseen inputs. The full negative effect of current key raw material prices cannot be compensated for in the short term. However, we are convinced that, with continuous innovation and diversification of our portfolio and a strong ongoing commitment to the premium segment through brands and our own brand, we can expect positive changes in the medium term. Zvečevo also intends to implement significant capital investments in the medium and long term to improve productivity and efficiency in production processes, says Duić.

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Increased Transportation Costs

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Even larger global chocolate manufacturers like Hershey Co. are trying to cope with record cocoa prices. They will have to lay off as much as five percent of their workforce, they told CNN.

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From Mondalez, they state that they currently have enough stock but will have to raise prices for their chocolate products in Europe, according to Yahoo! Finance. Last year, their product prices in North America rose by 7.4 percent, while the overall business volume fell by five percent.

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In addition to cocoa, according to the consumer price index, sugar and other sweeteners have increased by 7.2 percent compared to last year. The reason for the increase in this food product was also adverse weather conditions. The unstable situation in the Red Sea area could also affect the correction of chocolate prices. Due to Houthi attacks on ships in one of the most important trade routes and the shortest shipping route connecting Asia and Europe, the delivery time of goods is extended, and thus new fuel costs arise.

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– We currently have no problems with the delivery of quantities. An additional challenge is the situation in the Suez Canal traffic, as the increase in transportation companies’ costs will consequently spill over to all industries, they conclude at Kraš.