Chocolate could lose its ‘recession-proof’ reputation, warns ICCO

Futures hit their highest level since October 1985 on December 23, closing at £1820 a tonne as speculative investors surged onto the market on the back of reports of extremely tight supply. But the International Cocoa Organisation has warned that such a rush to invest in cocoa could be premature.

Although the organisation said that cocoa bean arrivals at ports in the Ivory Coast – the world’s biggest cocoa producer – were “the slowest in years”​, it warned that the outlook for 2009 chocolate consumption is still uncertain.

It said: “Most analysts are expecting that this year’s main crop in the Ivory Coast will be significantly lower than in the last season…​However, processing margins have been declining in recent months, probably reflecting a worsening outlook for chocolate consumption.”​

Uncertain view​

Chocolate has been hailed as virtually immune to recession in recent months, as people continue to reach for small indulgences even in times of economic gloom, and many manufacturers have reported strong profits during 2008. But the ICCO is not alone in its prediction of a bumpier ride for chocolate makers in the coming year.

In its latest cocoa market report, chocolate and cocoa manufacturer Barry Callebaut said that “uncertain sales in light of the economic crisis will probably lead to a lower demand for cocoa products in 2009.”​

Despite this, it added that it remains “very complicated for market participants to adopt a firm view on cocoa price outlook.”​

The ICCO agrees that the economy’s impact on chocolate consumption in the coming year is difficult to predict.

It said: “Indeed, uncertainty prevails on the degree of resilience on the chocolate market to the deterioration of the global economic environment.”​

A spate of difficulties has hit supply in the Ivory Coast, which provides 38 per cent of the world’s cocoa, including political unrest, corporate corruption and strikes.

December is usually the peak of the harvesting season, but from October 1 to January 4, arrivals at Ivory Coast ports stood at just 491,000 tonnes, down from nearly double that – 803902 tonnes – a year earlier.

Better harvest​

In addition, part of the supply problem has been caused by rain coming at the wrong time, which resulted in the spread of black pod disease and consequently lower yields.

Although the harvest from the main crop is expected to remain low, there may be a glimmer of hope on the horizon as rain has now come to the Ivory Coast at the right time to salvage mid-crop cocoa production.

The mid-crop harvest takes place from April to October and is the smaller of two annual harvests but, if rains continue, a good yield could help to ease supply problems.