The chocolate industry is navigating a turbulent period as cocoa prices have reached unprecedented heights. Since the onset of 2024, the cost of cocoa has doubled from its levels in the second half of 2022, causing a ripple effect throughout the chocolate business and affecting consumers worldwide.
Major chocolate companies such as Hershey and Mondelez International, which owns Cadbury, have already passed these increased costs onto their customers.
As a result, Hershey reported an 11.5% drop in annual profit for the fourth quarter of 2023 and announced a 5% reduction in its workforce. Barry Callebaut, the largest chocolate maker in the world, is also feeling the pinch, planning to lay off 2,500 employees, which constitutes 18% of its workforce.
Climatic Conditions Affecting Cocoa Production
The Economist points to weather patterns as a contributing factor to the rising costs. "Last season, El Nino weather conditions... led to unseasonably high temperatures and rains, which damaged crops." This phenomenon has severely impacted cocoa production in West Africa, particularly in Ghana and Ivory Coast, which together account for "about 60% of the world's crop."
2024 has seen the continuation of adverse weather conditions, with "El Niño brought a severe drought to cocoa farms," further diminishing production. This year, the "gap between global production and consumption will be the largest since 2014," as estimated by Bank Ing.
The situation is exacerbated by diseases that have spread across cocoa plantations.
"Swollen shoot virus and black pod disease - killers of cocoa trees - spread across Ghana and Côte d'Ivoire during heavy rains last year," the article says.
By the end of 2023, approximately "20% of cocoa trees in Côte d'Ivoire" were infected with the swollen shoot virus, as reported by Tropical Research Services.
Structural and Regulatory Challenges
The crisis is also fueled by structural issues within the cocoa market.
The governments of Ghana and Ivory Coast regulate the cocoa markets and set prices for farmers, which are now "250% higher than farm sale prices in Ghana in 2023," according to Corporate Accountability Lab.
This discrepancy discourages investment in new plantations and reduces the usage of fertilizers, making trees more vulnerable to weather extremes and disease.
The cocoa crisis is reflective of wider agricultural challenges. "Extreme weather conditions also affected other raw materials," with droughts in Thailand and India impacting rice plantations and heavy rains in Brazil affecting sugar exports.
Cocoa prices reaching a "more than 46-year high in trading" signifies the severe and widespread nature of the crisis, affecting not just the chocolate industry but global agriculture as a whole.
