Cocoa Prices Skyrocket: An Attack on African Farmers

Cocoa prices have skyrocketed to nearly $10,000, a fresh all-time high. In 2024 alone, Cocoa prices are up 130% and outperforming most assets. First it was Orange Juice and Olive Oil, now its Cocoa prices exploding. Commodity prices are outperforming many hedge funds. Commodity prices across the board seem to be permanently elevated. The days of low oil prices are gone and consumers are feeling the pain.
Purchasing power of the US Dollar is down over 20% in just 4 years. Reasons that are being given include; weather damage in West Africa, supply constraints, increased demand, poor farmer returns and EU rules that are impacting supply. The main talking point has been that the production of cocoa has been under severe strain due to climate change, plant diseases and unsustainable farming practices.
The global cocoa market is in turmoil as prices soar to unprecedented levels, exceeding $10,000 per ton, driven by a perfect storm of challenges affecting major producers in West Africa, notably Ivory Coast and Ghana. Since the beginning of 2024, prices have jumped up 2.4 times. Experts say that the rise in cocoa prices was due to drought in West Africa and soaring fertilizer costs. The deficit won’t be quick since new cocoa trees take years to yield beans, predicting a 1.5- to 3-year time frame to overcome the shortage.
Cocoa futures jumped to a record high in New York on Thursday morning as traders confronted new supply problems in Ghana, the world’s second-largest cocoa producer. The Ghana Cocoa Board, the regulator, is speaking with major commodity traders about delaying the delivery of 150,000 to 250,000 tons of cocoa until the next growing season due to dwindling bean supplies. The traders are demanding massive discounts for the possible delay. Talk of a delay was enough to push cocoa futures in New York to a new intraday record high of $10,771 per ton. Prices have surged above the $10k mark as the world faces another year of supply deficits.
EU regulation on deforestation impact cocoa supply
The restriction of cocoa exports from Ghana and Ivory Coast to the EU will trigger a global shortage and driving prices even higher. The EU regulation on deforestation is going to worsen the shortage of cocoa that is coming out of Ghana and Ivory Coast. So, adding an export ban on ‘irresponsibly sourced’ cocoa (that’s how they put it) is acting as an export ban of cocoa from Ghana and Ivory Coast into the European Union. SO what is this deforestation regulation? The EU passed a law that bans the import of products linked to deforestation or forest degradation. The law applies to commodities such as soy, beef, palm oil, coffee, cocoa, and wood. The law requires companies to prove that their products do not originate from recently deforested land or have contributed to forest degradation, or else face heavy fines. The law aims to reduce deforestation and protect biodiversity.