Grocery shopping this Christmas season may bring some relief compared to recent years, as declining food inflation in many countries helps ease pressure on holiday budgets. Except, chocolate!
As consumers in Germany rush to stock up for the holidays, local media reported this week that they are paying nearly 50% more for Kinder Chocolate Santa Claus. Even before the Christmas shopping begins, the UK consumer association Which? Warned that prices for some bars and luxury chocolate gift boxes have almost doubled across the UK.
Meanwhile, a French chocolate maker told regional daily west france Recently they are now paying up to €12,000 ($12,700) per metric ton of cocoa – the main ingredient in chocolate – compared to €3,000 a year ago.
Chocoholics’ worst nightmare
It looks like the world is in the grip of a major chore-inflation problem and, according to some commodity traders, it’s about to get worse.
At the heart of the issue is a major shortage of cocoa, following a devastating crop failure in West Africa caused by cocoa swollen shoot virus (CCSV), which spreads from tree to tree and can reduce crop yields by 50%. Two years.
A wetter-than-normal rainy season as a result of the El Niño weather phenomenon and fertilizer shortages caused by Russia’s invasion of Ukraine – which disrupted exports through the Black Sea – are other contributing factors, along with climate change.
Cocoa futures on London’s Intercontinental Exchange (ICE) were trading at 8,363 UK pounds ($10,671, €10,136) per metric tonne last week, a five-fold increase in the price due in December 2022 and almost three-fold in the last twelve months.
“The most recent rally has been driven by concerns that Ivory Coast and Ghana’s mid-season crops could underperform expectations, leading to a potential crash in 2024/25,” said Steve Waterridge, head of soft commodities research at London-based Tropical. The production surplus may be reduced.” Research Services told DW.
Cocoa tree virus is a ‘disaster’ for farmers
Wateridge described CCSV as a “disaster” and said that “it seems that very little is being done to control its spread in Ivory Coast and Ghana, so the situation will only get worse in the future. “
Michelle Nardella, DThe Director of the Economics and Statistics Division at the International Cocoa Organization (ICCO) believes it is now important to advance sustainability programs among producers in Africa to improve agricultural practices.
“Small farmers are not necessarily aware of [CCSV’s] “Yields may be affected and they may not know what measures to take to stop them,” Nardella, who lives in Abidjan, told DW. “They may be reluctant to uproot them.” [cocoa trees] Simply because cocoa is their only source of income.”
I have been writing recently financial Times In the business daily, Pierre Andurand, founder and chief investment officer of Andurand Capital Management, warned of a “multiyear structural supply-demand deficit in cocoa beans” and said “much higher prices are coming.”
Andurand said global cocoa production had already fallen 13% in the 2023-24 season, noting that European and US cocoa pod stocks stood at 25% of their December 2023 levels – the lowest on record.
Other cocoa price watchers, such as the Association of the German Confectionery Industry (BDSI), which represents the interests of more than 200 confectionery producers, are concerned that production figures may be “unreliable”.
“There are conflicting data regarding the overall harvest in West Africa,” BDSI told DW. “Although some estimates indicate a decline, the arrival of deliveries from farms to ports, a very important indicator, is much higher compared to the same period last year.” It has increased considerably.” In a written statement.
Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) estimates that for every euro spent on chocolate bars, only about seven cents go to cocoa farmers, while manufacturers and traders get about 80 cents.
Ghana sweetens the deal for cocoa farmers
Farmers in Ghana, the world’s second-largest cocoa producer after Ivory Coast, began hoarding their beans in anticipation of higher prices, widening supply shortages.
The Ghanaian government last month announced a nearly 50% increase in the amount it pays farmers, hoping to prevent hoarding and smuggling to neighboring countries that offer higher prices. Last season, Ghana lost more than a third of its cocoa production to smuggling, according to Cocobod, the country’s cocoa board.
So far, the price cuts have had limited impact on demand. Per capita chocolate consumption in Germany is projected to rise from just 9 kilograms (19.8 lb) in 2018 to nearly 9.9 kilograms in 2023, according to BDSI. Separate data from market research firm NIQ shows chocolate sales are down 1.3% over the past 12 months.
Chocolate sales in the United States fell 5.5% through June, according to Chicago-based research house Circana, though that doesn’t include this year’s busy holiday season.
Options may take years to bear fruit
Meanwhile, if cocoa crop yields in West Africa continue to decline, competitors are waiting to increase production. ICCO’s Nardella said that ““While production declined in Africa, it remained stable in Asia and Oceania and increased in Latin America.”
Some farmers in India, which currently accounts for only 1% of the world’s cocoa bean production, say they see the shortage as an opportunity. And while production in Indonesia, the world’s third-largest cocoa producer, peaked in 2010, the government is trying to rejuvenate the sector by subsidizing tree replanting programs. From January to October, Indonesia’s cocoa exports doubled year-on-year to $2 billion, according to . jakarta post,
“Farmers in other parts of the world are already reacting,” Wateridge, a highly respected cocoa expert, told DW. “This year we expect to see record production in Ecuador, Peru, Cameroon, Nigeria, the Democratic Republic of Congo and Uganda.”
But even if they dedicate large tracts of new land to planting cocoa trees, they typically take four years to mature, so may not help ease the current crisis.
Wateridge estimates the impact of the latest cocoa price hike on consumers will be delayed by six to nine months, meaning next year’s Christmas chocolate could be even more expensive.
“The two most important factors will be whether mid-crops will deteriorate further and whether higher prices will have a significant impact on consumption during the key consumption periods of Christmas, Valentine’s and Easter,” he told DW.
Edited by: Uwe Hessler
