Cocoa prices spike above $8K, boosted by global turmoil
Add Axios as your preferred source to
see more of our stories on Google.
Cocoa prices have skyrocketed to record highs, amid disruptive weather amplified by climate change and rising freight costs.
By the numbers: The benchmark cocoa contract, traded on the Intercontinental Exchange in New York set a new record on Friday, crossing $8,100 per metric ton. That's a 215 percent jump from last year, when prices were just $2,578.
The big picture: About two-thirds of the world's cocoa production happens in the West African nations of Ivory Coast and Ghana, a large portion of which is exported to Europe.
- Extreme weather patterns, like the El NiƱo that's giving way to a La NiƱa, are wreaking havoc on cocoa-producing regions, creating shortages and driving up retail prices.
- Soaring costs are weighing on the bottom lines of candy producers like Hershey, which warned about rising costs in its fourth quarter earnings.
- The Red Sea crisis is also playing a big role in driving up already high prices. Freight rates impacting international trade react to conflict in the region, according to a recent report by the International Cocoa Organization (ICCO).
Follow the money: Last month, Hershey reported flat sales in Q4 compared to last year. The candy giant struck a cautious tone as spiking cocoa and sugar costs squeezed sales volumes.
- In its recent earnings report, CEO Michele Buck said that "historic cocoa prices are expected to limit earnings growth this year."
Zoom in: Cocoa harvests are twice a year ā mostly from October to March for the main crop and from May to August for the mid-crop.
- But last year, frequent El NiƱo conditions set the world's top cocoa producers into a prolonged dry spell, impacting production.
- During the last quarter of 2023, heavy rains that swept West Africa led to the spread of black pod disease and swollen shoot virus, threatening the output.
What they're saying: Climate change and El NiƱo conditions are playing a much bigger role in driving up the prices, according to Tedd George, founder and the Chief Narrative Officer at Kleos Advisory.
- "A major crisis is underway in the cocoa sector and any kind of surplus that might have existed in the sector has gone," said George. "With climate change, it's going to be impossible to continue."
State of play: The Ivory Coast cocoa regulator, Le Conseil Cafe-Cacao, recently stopped selling contracts for cocoa exports forward sales for the 2024-25 season, due to declining production numbers.
What we're watching: How soaring prices impact the appetites of consumers already reeling from high food prices.
Editor's note: This story adds new details to an item originally published on Feb. 8.
