Chocolate shops squeezed as cocoa bean prices hit 46-year high

Noushad Thekkayil via Reuters

• Supply shortage caused by weather extremes in West Africa
• Record number of cocoa futures and options traded in 2023

While chocolate lovers the world over celebrated World Chocolate Day on Friday, retailers are watching the markets anxiously.

Cocoa bean prices soared to a 46-year high last week in London and have continued to rise since.

• Middle East shoppers find some ‘gaps on the shelves’
• India’s Ferns N Petals blossoms in the Middle East

The surge in bean prices is due to ongoing supply shortages and is set to increase further, according to London’s Intercontinental Exchange futures market.

Its benchmark September cocoa futures contract gained more than 2 percent on June 28 to £2,590 ($3,306) per metric tonne – marking the highest price since 1977 at £2,594.

At 12:15 GMT on Friday, it was trading at £3,301 per metric tonne.

Prices have soared on the back of tightening cocoa bean production caused by prolonged droughts, excessive rainfall and temperature fluctuations across West Africa.

Around 75 percent of all cocoa is produced by just four West African countries: the Ivory Coast, Ghana, Cameroon and Nigeria.

The Middle East chocolate market has not been spared the impact of these market dynamics according to an industry expert.

“Rising cocoa prices are a significant concern for the entire chocolate industry,” Rajesh Kumar, CEO of the UAE office of Ferns N Petals (FNP), India's largest online gift shop for cakes, flowers and personalised gifts, told AGBI.

In response to the rising costs chocolate makers have been compelled to raise their prices to cover their expenses, Kumar said.

“It's a difficult situation for both manufacturers and consumers, as the inflationary pressure of the past two years and the surge in cocoa prices have put significant strain on the chocolate market.”

As customers manage the new risk environment created by rising cocoa prices, a record number of cocoa futures and options were traded in the first half of 2023, according to new data from NYSE-listed Intercontinental Exchange.

Last month the International Cocoa Organization widened its forecast for a global deficit on cocoa supply from a previous 60,000 metric tonnes to 142,000 metric tonnes.

However, some industry experts are more optimistic about the commodity’s outlook.

“We believe this increase in the deficit estimates was ill advised and will have to be reduced again in the not-too-distant future,” said Shawn Hackett, a commodities trader and president of Hackett Financial Advisors, which trades agriculture commodities.

Hackett said he thinks that cocoa prices are “likely topping out as we speak” and expects higher cocoa bean production later this year.