Global cocoa prices hit unprecedented levels for the ninth consecutive day, raising major concerns among market traders that supply shortages could extend for the fourth consecutive season and beyond.
Rising cocoa prices are raising alarm bells, with industry experts expressing concern about potential systemic challenges and the growing impact on chocolate consumers.
Chocolate makers including US giant Hershey are facing historic cocoa prices, hurting their profit growth and slowing demand for higher-priced products.
Last Thursday, the Hershey Company (one of the major chocolate companies) said it expected rising cocoa prices to limit its profit growth this year. The company has already exhausted its stock of cheap beans, putting pressure on its financial performance.
“There is already panic in the market, but we are likely to go higher,” warned Paul Jull, an analyst at Rabobank.
He stressed the dangers facing the next season, noting that diseases affecting cocoa trees in West Africa, the most productive region, have become more dangerous than in recent years.
The industry faces the difficult task of cutting down affected trees and replanting them due to a lack of effective treatment options, sources told Reuters.
Benchmark cocoa futures in London hit a record high of 4,916 pounds a metric tonne on Friday, rising 2.1% to 4,757 pounds a tonne.
Prices have doubled since the beginning of last year. Similarly, in New York, benchmark cocoa futures on the Intercontinental Exchange hit a new high of $6,030 a tonne on Friday, closing 1.4% higher at $5,888 a tonne, almost double from early last year.
A recent cocoa survey by Reuters forecasts a global shortfall of 375,000 tonnes in the 2023-2024 season, higher than a previous estimate last August and representing the third consecutive shortfall for the market. Despite record high prices, cocoa sellers have largely withdrawn from the market, resulting in liquidity challenges.
The state of the cocoa market also affected other soft commodities, as raw sugar saw a slight increase of 0.2% to 24.02 cents per pound, while white sugar remained relatively stable at $665.50 per ton.
Arabica coffee prices rose 5.65 cents, or 3%, to $1,915 a pound and robusta coffee rose 3.5% to $3,217 a ton.
As cocoa prices continue to rise unprecedentedly, the industry braces for potential long-term consequences, with analysts closely monitoring upcoming crop rounds in the second quarter to assess the severity of the situation and its implications for future seasons.