SEVERAL major cocoa processing plants in Cote d’Ivoire and Ghana have halted or reduced operations due to soaring cocoa bean prices, exacerbating concerns over chocolate supply and pricing worldwide.
After three consecutive years of poor cocoa harvests in the two countries that collectively produce nearly 60 percent of the world’s cocoa, chocolate makers have already raised prices for consumers. Now, with a fourth poor harvest expected, cocoa prices have more than doubled over the last year, reaching numerous all-time highs.
‘We need massive demand destruction to catch up with the supply destruction,’ remarked Steve Wateridge, a world expert on cocoa from Tropical Research Services.
Chocolate makers rely on processors to turn cocoa beans into butter and liquor, essential ingredients for chocolate production. However, processors are struggling to afford purchasing beans at current prices.
State-controlled Ivorian bean processor Transcao, one of the country’s major plants, has ceased buying beans due to their high price. While the plant continues to process from existing stock, sources indicate that its capacity is significantly reduced, with operations almost at a standstill.
In Ghana, the situation is similar, with most of its processing plants, including the state-owned Cocoa Processing Company (CPC), suspending work for weeks at a time since the start of the season in October. CPC is currently operating at only about 20 percent of its capacity due to the shortage of beans.
The unprecedented price rally has disrupted the established mechanism for global cocoa trade, leading to supply chain bottlenecks. In normal times, traders and processors purchase beans from local dealers up to a year in advance at pre-agreed prices. However, in times of shortage, the system breaks down, with local dealers selling beans on the spot market at higher prices instead of fulfilling pre-agreed contracts.
Authorities in Cote d’Ivoire and Ghana typically intervene to protect local plants by issuing cheap loans or limiting the volumes of beans that global traders can purchase. However, this year, processors are unable to afford beans at higher spot prices, leading to production disruptions.
Chocolate makers have already raised prices in response to the crisis. US retail stores charged 11.6 percent more for chocolate products last year compared to 2022, according to data from market research firm Circana.
The International Cocoa Organisation (ICCO) anticipates a significant decline in global cocoa production this season, leading to a supply-demand mismatch and a deficit of 374,000 tons. Processors and chocolate firms will likely have to rely on cocoa stocks to meet their needs, with global cocoa stocks expected to reach their lowest levels in 45 years by the season’s end.
With the severity of bean disease in West Africa, experts warn that the cocoa market could face another deficit next season. If realised, this would mark four consecutive years of deficit, a scenario not seen since the late 1960s, according to ICCO data.