Global cocoa prices rose to unprecedented levels for the ninth consecutive day, raising major concerns among market traders that supply shortages may continue for a fourth consecutive season and beyond.
The spike in cocoa prices is raising alarm bells, with industry experts expressing concerns about potential systemic challenges and the looming impact on chocolate consumers.
Chocolate makers, including the American giant Hershey, are facing historic cocoa prices, affecting the growth of their profits and leading to a slowdown in demand for higher-priced products.
Last Thursday, Hershey Company (one of the leading chocolate companies) stated that it expects the rise in cocoa prices to limit the growth of its profits this year. The company has already exhausted its stock of cheap beans, exacerbating pressure on its financial performance.
“Panic is already there in the market, but we are likely to move to a higher level,” warned Paul Juul, an analyst at Rabobank.
He stressed the risks facing the next season, noting that diseases affecting cocoa trees in West Africa, the most productive region, have become more dangerous than they were in recent years.
Sources told Reuters that the lack of effective treatment options leaves the industry facing the difficult task of cutting down the affected trees and replanting them.
Benchmark cocoa futures in London rose to a record high of 4,916 pounds per metric ton on Friday, recording a 2.1% increase to 4,757 pounds per ton at the close.
Prices have doubled since the beginning of last year. Likewise, in New York, benchmark cocoa futures on the InterContinental Exchange reached a new high of $6,030 per ton on Friday, closing up 1.4% at $5,888 per ton, nearly doubling since the beginning of last year.
A recent cocoa poll conducted by Reuters expected a global deficit of 375,000 tons in the 2023-2024 season, which exceeds the previous estimate last August and represents the third consecutive deficit for the market. Despite record high prices, cocoa sellers have largely withdrawn from the market, resulting in continued liquidity challenges.
The situation in the cocoa market also affects other soft commodities, as raw sugar witnessed a slight increase of 0.2% to reach 24.02 cents per pound, while white sugar remained relatively stable at $665.50 per ton.
Arabica coffee prices rose by 5.65 cents, or 3%, at $1,915 per pound, and Robusta coffee rose by 3.5% at $3,217 per ton.
As cocoa prices continue to rise unprecedentedly, the industry is bracing for potential long-term consequences, with analysts closely monitoring the upcoming crop rounds in the second quarter to assess the severity of the situation and its implications for future seasons.
