Shoppers willl pay more for their Valentine’s Day treats this year amid skyrocketing cocoa prices - and bad weather in west Africa means they will likely need to increase still further in months to come.
Cocoa prices in New York’s Intercontinental Exchange (ICE) surged to an all-time high of $5,874 (£4,658) per tonne last week, an increase of more than 40% since the start of the year.
Meanwhile, London cocoa futures rose 7.3%, to £4,600 per tonne, more than double than they were at the start of last year.
Cocoa commodities almost doubled in price last year due to poor harvests and continued high demand. But poor weather in the Ivory Coast and Ghana, where the majority of the world’s cocoa comes from, has further affected crop yields in recent weeks.
Strong seasonal Harmattan winds, which blow from the Sahara region, have brought dry weather to west Africa, affecting not only output but also crop quality.
This has been compounded by the spread of diseases in cocoa plantations across both Ivory Coast and neighbouring Ghana.
The situation is also set to worsen throughout the year, according to experts who warn Easter treats too will remain under pressure.
“The recent price rises look baked in for a while and are unlikely to change,” according to Tristan Fletcher, CEO at commodity price forecasting platform ChAI.
Shoppers should expect even more price hikes throughout the year, Fletcher said, with speculators in the cocoa market currently betting “very heavily” on prices rising even further in the long term as ”weather patterns, shipping and demand all point to a long haul for any manufacturer buying cocoa, with no dip in price expected”.
“Whilst producers will have tried to resist passing these costs on to consumers, they cannot defy gravity indefinitely so any price rises passed on recently are likely to stay in place for Valentine’s boxes of chocolates, Easter eggs and possibly even Christmas treats too,” Fletcher warned.
Confectionery makers often negotiate long-term fixed price contracts for cocoa, which mitigates the impact of sudden market swings. But the prolonged issues with cocoa production have already started to reflect on shelf prices.
The average price across the mults for Cadbury Dairy Milk 95g-110g this week stood at £1.52, a year-on-year increase of 10%, according to the Grocer’s Key Value Items tracker. Meanwhile, own-label dark chocolate (100g) cost on average 48p – up 41% from the same period last year.
Read more: Dear Valentine’s as prices of chocolate gifts rise in mults
Love Cocoa and H!P Chocolate founder James Cadbury said the company had managed to secure its Easter and Valentine’s supply - “but the rest of the year, particularly the Christmas season, poses real challenges, especially as we use a high percentage of cocoa in our chocolate”, he said.
”We are not in the position to fix longer contracts given our size, which requires complex derivative agreements with banks.”
Cadbury said the brand was “trying to maximise efficiencies and reduce costs in the business as our gross margin will be affected, and there is only so much we can pass on to customers”.
However, he warned ”price adjustments will be necessary in a few months unless something dramatically changes”.
Cocoa commodity prices are highly volatile because three-quarters of the world’s cocoa come from that single region of Africa, which means international buyers cannot turn elsewhere for huge volumes when production slumps there.
In addition to climate change challenges of recent years – increased dryness and reduced soil moisture have led to shrinking cocoa output – farmers have struggled even more in recent months because the seasonal event El Niño has aggravated the situation.
Ivory Coast has halted forward sales of cocoa for the marketing year (MY) 2024/25, and mid-crop forward sales for MY2023/24 amid constrained production estimates, stoking fear amid chocolate buyers.
US confectionery giant Hershey warned last week higher cocoa prices were likely to hit its earnings this year. Hershey CEO Michele Buck said: “Given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage our business.”
Cadbury’s owner Mondelez too has previously pointed to significant cocoa and sugar costs as a challenge. The latter’s costs are also expected to rise again in the first quarter of 2024, having dipped last December.
This is largely due to El Niño-linked adverse weather conditions in key sugar-production countries like India and Thailand, as well as a ban on sugar exports by India and a delayed harvest in the EU because of floods.
Read more: Why chocolate has reached a melting point: confectionery category report 2023
Ivory Coast has halted forward sales of cocoa for the marketing year (MY) 2024/25, and mid-crop forward sales for MY2023/24 amid constrained production estimates, stoking fear amid chocolate buyers.
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