Cocoa prices hit record highs: Supply woes, speculation, and the impact on chocolate

The prices of cocoa on commodity exchanges broke through the £8,000 per ton level in March, reaching historical records. While experts point to supply issues, there are also voices about possible speculation in the market.

In recent days, the prices of cocoa on global commodity exchanges continued to rise, breaking through the psychological barrier of £8,000 per ton. This marks the highest record of this commodity in history. Already last week, the price of the commodity gained more than 6 percent, reaching a level of over £7,200.

At the beginning of last year, the price was significantly lower - it was about £1,600, but in the last 12 months, it has been continuously rising. At the end of last year, the price level exceeded £4,000, and since the beginning of this year, the increase has accelerated.

The situation on the cocoa market was commented on Twitter by Tomasz Wyluda, an economist. "The price of cocoa is hitting absolute records. It has already exceeded £8,000 per ton. Soon this will translate into higher chocolate prices," notes the expert.

In his opinion, apart from poor harvests, the price of the commodity is also influenced by "low price elasticity of demand", which means that consumers may not necessarily give up sweets with a price increase.

Wyluda also does not exclude the speculative factor in the futures market. Krzysztof Pawiński, president of Maspeks, is more decisive in his assessment. "No extra demand or supply shock. Pure speculation. Contracts/bets without real delivery. And so it goes on. Instruments once created to stabilize price fluctuations of products, today serve to rock the boat," evaluates the businessman.

Supply problems the main cause of increases. Market analysts indicate that the current situation is primarily due to supply problems with cocoa. West Africa, which accounts for about 70 percent of the world's production of this commodity, has been struggling with weaker harvests for three years. The reason is unfavorable weather conditions – higher temperatures and less rainfall, which hinder the cultivation of cocoa trees.

As noted by the International Cocoa Organization (ICCO), in the current season we may be dealing with a record deficit of the commodity, reaching 320,000 tons. According to Bloomberg Intelligence analysts, the problem with cocoa supply may be structural and persist longer, while global demand for this commodity steadily rises.

The sharp increase in cocoa prices poses a serious challenge for the chocolate industry. As reported by Reuters, companies such as Malaysia's Guan Chong, one of the world's largest cocoa processors, are actively looking for alternative sources of raw materials, including in Ecuador, Peru, and Indonesia. They fear failure to fulfill contracts by major suppliers from the Ivory Coast and Ghana.

Rising chocolate production costs are already being passed on to consumers, especially in Europe, which is one of the key markets. Additional challenges for the industry may be new EU regulations aimed at reducing the sale of products contributing to deforestation for new crops.

Regardless of the reasons, the sharp increase in cocoa prices is causing concern among chocolate producers and consumers. As experts emphasize, in the long term, it will be crucial to develop strategies that will secure stable supplies of raw materials and avoid further price turbulence in the market.