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Global chocolate prices set to soar as cocoa processing slows in Ivory Coast and Ghana

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According to Reuters, major cocoa plants in Ivory Coast and Ghana have halted or cut processing due to financial constraints in buying beans, as reported by four trading sources. This could potentially cause a significant increase in chocolate prices globally.

Due to three successive years of low cocoa harvests in the two countries that contribute to almost 60% of the world’s cocoa production, chocolate manufacturers have increased prices for consumers. With a fourth poor harvest expected, cocoa prices have more than doubled over the past year.

Chocolate producers depend on processors to transform raw cocoa beans into butter and liquor for chocolate manufacturing. Nevertheless, processors assert that they are unable to afford purchasing the beans.

Transcao, a state-controlled Ivorian bean processor, has halted bean purchases due to pricing concerns. Despite not disclosing operational capacity, the company is maintaining processing from existing stock. Nonetheless, two industry sources, speaking anonymously, suggest that the plant is nearly idle.

Continue Exploring: Chocolate giants Hershey and Cadbury plan price hikes as cocoa prices skyrocket

One of the two sources indicated that other significant state-run plants in Ivory Coast, responsible for nearly half of the world’s cocoa production, may soon face potential shutdowns.

Both sources also disclosed that Cargill encountered difficulties in bean sourcing for its primary processing facility in Ivory Coast, resulting in a temporary cessation of operations last month. When approached for comment, Cargill declined to provide a response on the issue.

In Ghana, the world’s second-largest cocoa producer, the majority of its eight plants, including the state-owned Cocoa Processing Company (CPC), have periodically halted operations for several weeks since the season commenced in October, as reported by two distinct industry sources to Reuters. The CPC indicated that it is presently operating at around 20% of its capacity due to the shortage of beans.

The price hike has caused disruption in the traditional global cocoa trade system, wherein farmers typically sell beans to local dealers, who in turn distribute them to processing plants or global traders. These traders then supply beans or various cocoa products—such as butter, powder, and cocoa liquor—to major confectionery companies like Nestlé, Hershey, and Mondelēz.

In usual circumstances, the market operates under strict regulation, where traders and processors buy beans from local dealers up to a year in advance at agreed-upon prices, while local regulators establish lower farmgate prices for farmers.

Continue Exploring: Cocoa prices skyrocket to 45-year high amid expected crop shortages

Nevertheless, in times of shortages like the present year, the system falters. Local dealers frequently offer farmers a premium above the farmgate price to acquire beans, later selling them on the spot market at elevated prices instead of honoring pre-arranged agreements.

Global traders are scrambling to purchase beans at any cost to fulfill their commitments with chocolate companies, frequently leaving local processors facing shortages. Typically, Ivorian and Ghanaian authorities safeguard local plants by providing them with inexpensive loans or by restricting the quantity of beans that global traders can procure. However, this year, plants are not receiving the cocoa they’ve requested and are unable to afford the increased spot prices.

As a result, chocolate manufacturers have already implemented price hikes. According to data from market research firm Circana, US retail stores charged 11.6% more for chocolate products in 2023 compared to 2022.

SnackTeam
SnackTeamhttps://snackfax.com
SnackTeam is a specialised group of editorial staff motivated to improve the lives of individuals and society. The team intends to bring the most authentic, well-researched and dependable content for you and your loved ones every day.
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