Prices have been rising, not only the demand is too high, but the abnormal climate has also become the biggest driving force behind the food. Cocoa has been around since the end of 2022 and recently hit an all-time high approaching $7,000 per tonne. While rising costs are bad for consumers, chocolate manufacturers are likely to be more affected than consumers.
From the 1980s to 2023, cocoa beans traded in New York averaged well below $3,500 per tonne per year, but by February 22 of this year, cocoa topped $6,000 per tonne for the first time, and the market feared that it could go further, with cocoa beans soaring to $6,769 today.
Cocoa beans have skyrocketed this year. (source：google finance)
Until now, businesses have been passing on higher costs to consumers, but unlike many basic foods, no one needs chocolate to survive, so every price increase, comes with a sales risk. A survey last year by consumer intelligence firm NIQ showed that consumers are most likely to cut back on spending on chocolate and consomionery if inflation persists, second only to alcohol and cosmetics.
Faced with limited room for further price increases, chocolatiers are switching to alternative ingredients, or shrinking packaging, or using automation to cut production costs, and promote products with less cocoa content, while also laying off workers.
The rise in chocolate prices has hit salesFor more than a century, Hershey, which has been producing Kisses chocolate, has been declining in profits year on year, with profits falling by 11 percent in the fourth quarter of last year5%, warning that cocoa *** to unprecedented levels could seriously affect profits this year, and against a bleak backdrop, Hershey announced a 5% layoff.
Chocolate manufacturers often hedge their risk against the market, buying cocoa eight to nine months in advance as protection. As some manufacturers reduce the term of protection to six months, it is hoped that it will decline, but cocoa will last, forcing them to re-enter the market. Commodity broker Marex Group said chocolatemakers were only protected for about seven months**.
Changes in the Hershey share price over the past five years. (source：google finance)
Morgan Stanley analysts recently downgraded Hershey's rating to hershey, noting that "cocoa from mid-2023 could catch up with the company in 2025". Barry Callebaut, the world's largest Swiss chocolatier, will also lay off 18% of its workforce, affecting 2,500 people.
The reason for the skyrocketing price of cocoa is the climateCocoa is extremely vulnerable because it is very sensitive to any weather changes, since 2023 the Holy Child climate has caused extreme heat, rainfall and drought, three-quarters of the global cocoa bean ** comes from West Africa, which experienced an unusual climate, and in the first three months of February this year, the cocoa bean production in West Africa was significantly reduced by three tenths.
In addition to dryness, heavy rains also promote the breeding of pests and diseases. Ghana and Côte d'Ivoire are the two largest cocoa producers, and the spread of black pod disease in the country has caused the loss of up to 10% of the cocoa trees in Ghana and poses a major threat to the sustainability of the country's cocoa industry. Another deadly disease, the slump virus, which is just as devastating as black pod disease, infected about 20 percent of cocoa trees in Côte d'Ivoire last year, according to the Tropical Research Service.
Cocoa shortages are unlikely to be temporary. According to World Nature**, cocoa bean yields in Africa are likely to drop significantly, as much of the land used for cultivation in the future will no longer be suitable for cultivation. At present, the European Union, the Codex Alimentarius Commission (CAC), the United Kingdom and the United States and other places stipulate that the weight of total cocoa solids must reach more than 35% before it can be called chocolate.
Header image**:p ixabay).