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Understanding the Global Cocoa Crisis: An Overview for Stakeholders

Cocoa Market Chart
Global Market Chart Cocoa

The global cocoa industry is facing a crisis characterized by a shortage and rising prices due to four main factors.

Recent months have seen a surge in inquiries from clients about the sudden cocoa shortage and price hike, particularly in the West African region. In response, we aim to offer clear, detailed, yet succinct explanations. This brief is designed to shed light on the key factors contributing to the global cocoa crisis, providing our audience, including current and prospective purchasers of cocoa-derived products, with a comprehensive perspective on the prevailing challenges.

  1. Climate Change and Drought: The primary cocoa-producing region, West Africa, which accounts for about 80% of the world’s cocoa, has suffered from climate change-induced droughts. These harsh environmental conditions have wreaked havoc on cocoa plantations, significantly reducing crop yields.

  2. Underinvestment in Agriculture: The majority of cocoa farmers are smallholders who struggle to make a sustainable living. This financial strain prevents them from investing in their farms, leading to a gradual decrease in productivity. Aging cocoa trees and low replanting rates also contribute to this decline.

  3. Investor Speculation: Supply issues, exacerbated by West Africa’s dry conditions and Harmattan winds, have led to speculative trading. Investors reacting to these supply-side challenges have pushed cocoa prices higher, with speculation being a primary driver of the price increase.

  4. Structural Market Problems: The cocoa market suffers from fundamental structural problems. Cocoa growers, despite producing a valuable commodity, receive only a small fraction of the profits from the value chain. This inequitable distribution of wealth, combined with insufficient reinvestment and the problem of aging trees, aggravates the cocoa shortage.

These factors have forced chocolate manufacturers to deal with higher cocoa costs, resulting in increased product prices and the phenomenon of shrinkflation. While some experts predict a potential reduction in cocoa prices in the future, the industry currently faces a significant hurdle.


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