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Cocoa prices soar to record high as El Niño batters West African growers

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Global cocoa prices have soared to record highs as bad weather batters harvests in the world’s main producing countries in West Africa. 

New York cocoa prices surged to $5,874 per ton on Thursday, a rise of more than 40 per cent since the start of the year. London cocoa futures meanwhile have more than doubled from a year ago, rising 7.3 per cent on Thursday to £4,600 per ton.  

The moves prompted a warning from chocolate maker Hershey that surging raw material prices will hit profits.

“We’ve had a humongous rally since the start of the year. I don’t think anyone was expecting it,” said Paul Joules, cocoa analyst at Rabobank, adding that this was “from an already ridiculously high position” at the end of 2023.

Line chart of ICE US Cocoa Futures ($ per ton) showing Cocoa prices spike on African crop fears

The global supply shortfall is creating “a lot of fear that . . . we could even move to a new normal range of higher prices,” Joules said.

Ivory Coast and Ghana together produce about 70 per cent of the world’s cocoa beans and both countries have seen their cocoa crops hampered by the El Niño sea temperature phenomenon, which disrupts rainfall patterns and brings hot, dry weather to West Africa. Growers are also battling a large outbreak of disease.

Traders have been betting that the poor weather conditions will continue to crimp supplies and keep global prices high.

Large trading volumes in London this week suggested that a lot of “new managed money is coming into the market”, according to Andrew Moriarty, price reporting manager at Mintec. “Speculators are knocking the price up, forcing cocoa producers to cover their shorts.”

The price rises are dealing a blow to chocolate manufacturers. “Historic cocoa prices are expected to limit earnings growth this year,” said Michele Buck, chief executive of Hershey in the company’s earnings statement on Thursday. The company reported a 6.6 per cent fall in sales in the fourth quarter, as consumers struggling with inflation curtailed their spending on sweet treats. 

For consumers, the worst is still to come, according to analysts. In 2023 a lot of chocolate companies were absorbing high prices and had some stockpiles, said Joules. But after a year-long rally, “these companies are now fully exposed to these higher commodity prices . . . the only way for [them] to absorb these prices is to pass them on to the consumer”.

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