In recent years, during back-to-back seasons, the cocoa sector has faced challenges, including prolonged droughts and crop failures, making it a fragile sector. Tackling record-high cocoa prices has been a persistent issue. When cocoa prices reached a record high of $12,261 per tonne in April, it significantly impacted the chocolate industry.
According to the OPEC Fund for International Development, Ghana is the world’s second-largest cocoa producer, supplying approximately one-fifth of the world’s cocoa each season. Ghana and the Ivory Coast contribute about 60% of the world’s cocoa supply.
Ghana has experienced a significant drop in cocoa output for the third consecutive season. Production there has been negatively impacted due to pests, diseases and the impact of climate change, particularly the El Niño phenomenon. This environmental decline threatens cocoa farmers’ livelihoods, making earning a fair and sustainable income a considerable struggle. Côte d’Ivoire has also faced ongoing disruption. Cocoa production decreased to 683,269 tonnes in the 2021/22 season and 656,140 tonnes in the 2022/2023 season.
The escalating costs and unpredictability have affected the entire sector, prompting a shift towards agility and the emergence of new innovative ideas to navigate ongoing cocoa disruption. Efforts to improve collaboration, implement new technology to mitigate the impact of seasonal challenges, research to enhance scientific knowledge, and launch income acceleration programs are key areas where the cocoa sector is dedicating its time, attention and resources.
Pricing in Europe and US
Expectations of a better crop outlook for the 2024/25 season, especially in Côte d’Ivoire and Ghana, have contributed to the current drop in cocoa prices in the US. Nevertheless, there is still concern considering the cocoa contract prices for the 2024/25 season—in December 2024, March 2025 and May 2025—as the contracts earlier in the season are priced higher than those in later months. This implies that supply limitations may continue despite the better crop outlook for 2024/25.
In May 2024, data suggested that consumer prices for cocoa and powdered chocolate in the European Union (EU) were 6.3% higher than in May 2023. However, according to the European Commission, cocoa price hikes in Europe had slowed by July 2024.
As the new season is about to start, the market will be in a ‘wait and see’ mode to see if the expectations of a better output will materialise, resulting in improved bean availability, stock replenishment and consequently lower prices.
Factors affecting regions: Consumption habits, stocks and the EUDR
Cocoa importation levels have also decreased in the US. As of September 2024, total net imports of cocoa in bean equivalent have decreased by more than a quarter, data from the ICCO reports. In October 2022-March 2023, this total stood at 460,990 tonnes. This figure dropped by 26% to 343,200 tonnes in October 2023-March 2024. The decrease can be attributed to the global shortfall in production, which has led to lower imports of cocoa beans and, consequently, cocoa products.
Cocoa bean stocks in US ports have also seen a significant decline. Stock inventories have seen a 52% loss, dropping from 5,180,254 in August 2023 to 2,468,470 in August 2024. However, year-on-year grindings have held up well in the US despite the low bean imports. The 2023/24 season’s grindings are up 2% compared to the first half of the 2022/23 season. Some analysts believe that the increase in North American grindings may be due to chocolate makers buying as much as they can before a shortage in supply occurs.
Also, manufacturers may be covered due to the market strategy of forward contracting, and processing may not see an immediate decline. For the comparison period, net imports of chocolate, unlike the other products, witnessed an increase of 67%.
With high cocoa prices, expectations of changes in cocoa products used for chocolate cannot be ruled out. Cocoa butter prices are directly related to cocoa bean prices. Companies are, therefore, less likely to use less cocoa liquor and butter or switch to vegetable fats or cocoa butter equivalents (CBEs) to replace cocoa butter.
On the other hand, cocoa powder prices are inversely related to cocoa beans and may currently be cheaper than butter. The move from less traditional chocolate confectionery to more powder-based confectionery is also expected. Powder-based confectionery or products are usually cheaper and may support the growth in grindings and, consequently, consumption. Based on the comparison of the net import of products, though all products witnessed a decline, the fall in cocoa powder was lower.
Amid the upcoming scheduled introduction of the European Union Deforestation Regulation (EUDR), European Union (EU) trade partners, concerned about farmers’ rights, are requesting additional time to support the agricultural industry with deforestation regulation compliance.
In June, the Retailer Cocoa Collaboration (RCC) released its latest trader assessment results, highlighting the lack of sustainability progress and ethical efforts. The report highlights that while the incoming EUDR prompts efforts to improve traceability in the cocoa supply chain, which is increasing, there are still challenges in addressing poverty and child labour in the sector, especially in the indirect supply chain. Concerns within the indirect and wider supply chain see traders avoiding purchasing the chocolate ingredient directly from the farmer, opting to obtain it from a different source.
The Cocoa Farmers Association of Nigeria (CFAN) wrote a letter to the European Commission on 27th July, asking for a postponement due to insufficient information about the EUDR, European news agency EurActiv reports. They are not alone either, as the US and China have urged delays in the EUDR’s implementation. Vietnam, on the other hand, has developed and issued an action plan framework for EUDR Compliance designed to give comprehensive guidance to national and provincial institutions.
Looking ahead to the new cocoa season
The cocoa harvesting season spans from October to June. As we approach the 2024/2025 season, producers eagerly anticipate what the upcoming season has in store. The CEO of Cocobod has expressed optimism, anticipating a resurgence in cocoa output, with expectations to yield over 800,000 tonnes of cocoa for the 2024/2025 season.
Despite a challenging season for the third consecutive year, recent statistics on cocoa production do little to alleviate ongoing concerns within the industry. With the current harvest nearing completion, government-led cocoa board Cocobod reported that Ghana’s cocoa output is just over half its average. According to data from Cocobod, as of 16th July, the figure stood at 429,323 metric tonnes, representing less than 55% of Ghana’s average seasonal output.
Both Ghana and the Ivory Coast forward-sell their harvests. However, due to a shortfall in this season’s harvest, Ghana’s Cocobod cannot fulfil its cocoa contracts with exporters and traders. In anticipation of better harvests in the upcoming season and potential price decreases, traders may sell more cocoa now and purchase trading contracts later at a reduced price to maximise their profits.