Cocoa supply constraints – it’s performance in 2024 has been nothing short of extraordinary. Posting an impressive 182.82% price surge since the year began, it has outpaced every other commodity, capturing the world’s attention.
This rally, primarily driven by supply shortages in Africa—home to over 70% of the world’s cocoa production—serves as a wake-up call to the vulnerabilities of global commodity markets. For Africa, the implications go beyond economics; they touch on livelihoods, sustainability, and the continent’s broader role in global trade.
West Africa, the epicentre of global cocoa production, has faced an unprecedented confluence of challenges in 2024. Erratic weather patterns, a crippling crop disease, and fragile supply chains have left the region struggling to meet global demand. The result has been a dramatic spike in cocoa prices, with futures on the New York exchange reaching nearly $13,000 per tonne. This rally not only highlights the structural issues in cocoa production but also raises questions about Africa’s capacity to navigate an increasingly volatile market.
Africa’s Central Role in Cocoa Production
The cocoa industry is an economic lifeline for millions of African farmers. Côte d’Ivoire and Ghana, the two largest producers, account for nearly 60% of global output. Cocoa exports form a significant portion of these nations’ GDPs, funding public services and infrastructure development. Yet, this reliance on cocoa has left these economies vulnerable to global market shifts.
In 2024, this vulnerability became starkly evident. A combination of heavy rains and scorching heat created the perfect conditions for fungal diseases, devastating cocoa crops across West Africa. Farmers faced reduced yields, with some losing entire harvests. For a sector already under pressure from fluctuating global prices, the additional strain pushed many producers to the brink of financial collapse.
The Socioeconomic Impact on African Farmers
For the millions of smallholder farmers who rely on cocoa as their primary source of income, 2024 has been a year of uncertainty. Rising global prices have not translated into better incomes for farmers. In many cases, the higher costs of inputs—such as fertilisers and pesticides—have outpaced the increase in cocoa prices.
In Ghana, for instance, farmers earn less than 10% of the value of a chocolate bar sold in Europe. This inequitable distribution of profits underscores the structural challenges in the global cocoa trade. With most of the value added during processing and marketing occurring outside Africa, local farmers remain at the mercy of international market dynamics.
The Role of African Governments
Governments in Côte d’Ivoire and Ghana have long sought to address these disparities. In 2019, they introduced the Living Income Differential (LID), a $400-per-tonne premium aimed at boosting farmers’ incomes. While the LID has provided some relief, it has been insufficient to shield farmers from the extreme volatility seen in 2024.
Moreover, both nations continue to grapple with the challenge of balancing short-term economic pressures with long-term sustainability. In Côte d’Ivoire, illegal cocoa farming in protected forests has led to widespread deforestation, exacerbating climate change and threatening future production. Ghana faces similar issues, with its cocoa farms encroaching on vital ecosystems.
The Push for Local Value Addition
One way Africa could mitigate its vulnerability is by adding more value to its cocoa before export. Processing cocoa into chocolate or cocoa butter domestically would allow African countries to capture a larger share of the value chain. However, significant barriers remain, including limited infrastructure, high energy costs, and a lack of access to international markets.
Some initiatives show promise. In Ghana, local companies like Niche Cocoa Industry have begun exporting processed cocoa products, demonstrating the potential for value addition. Côte d’Ivoire has also invested in processing facilities, aiming to process 50% of its cocoa locally by 2030. While these efforts are commendable, they represent a fraction of what is needed to transform Africa’s role in the global cocoa market.
Global Market Dynamics and Their Impact on Africa
Cocoa’s 2024 rally has not occurred in isolation. The broader global commodity market has seen significant disruptions, from geopolitical tensions to supply chain bottlenecks. In this context, cocoa’s price surge reflects both local challenges in Africa and systemic issues in global trade.
The Role of Speculation
As cocoa prices skyrocketed, many traders exited the market, unable to bear the rising costs of maintaining positions. This exodus reduced market liquidity, leading to even greater price volatility. For African producers, this volatility adds another layer of uncertainty, making it difficult to plan for the future.
Speculation has also played a role. With traditional assets like equities and bonds underperforming in 2024, some investors turned to commodities like cocoa as a hedge. This influx of speculative capital has amplified price swings, benefiting traders but leaving producers and end consumers to bear the brunt.
The Chocolate Industry’s Response
For global chocolate manufacturers, 2024 has been a year of tough decisions. Many had delayed hedging new inventory in the hope of lower prices, only to find themselves paying record-high rates. Some, like smaller chocolatiers, have started locking in prices, recognising that further delays could prove even costlier.
This shift has significant implications for African producers. As manufacturers scramble to secure supplies, they may be forced to offer better terms to producers. However, without systemic changes, these benefits are unlikely to reach the smallholder farmers who form the backbone of the industry.
Sustainability and the Future of Cocoa
The challenges facing Africa’s cocoa industry in 2024 are a microcosm of broader issues in global agriculture. Climate change, resource depletion, and inequitable trade practices all threaten the sustainability of cocoa production.
Climate Change and Cocoa Farming
West Africa’s cocoa farms are particularly vulnerable to climate change. Rising temperatures and changing rainfall patterns have already reduced yields, and the situation is expected to worsen in the coming decades. Adaptation measures, such as planting drought-resistant cocoa varieties and adopting sustainable farming practices, are urgently needed.
However, these measures require significant investment, which many smallholder farmers cannot afford. International support, both in terms of funding and technology transfer, will be crucial in helping African farmers adapt to a changing climate.
Towards a More Equitable Cocoa Market
Achieving a more equitable cocoa market will require concerted efforts from all stakeholders. African governments must continue pushing for better terms in international trade agreements, while also investing in local value addition. The private sector, including multinational chocolate companies, has a role to play in ensuring that farmers receive a fair share of the profits.
Consumers, too, have a part to play. The growing demand for ethically sourced chocolate has the potential to drive meaningful change. By choosing products that support fair trade practices, consumers can help create a more sustainable and equitable cocoa industry.
Cocoa’s unprecedented rally in 2024 has highlighted the vulnerabilities and opportunities within Africa’s cocoa industry. While the continent’s dominance in global production gives it significant leverage, this potential remains underutilised due to systemic challenges.
For Africa, the path forward lies in addressing these challenges head-on. By investing in sustainability, enhancing value addition, and advocating for fairer trade practices, the continent can turn its cocoa sector into a driver of inclusive economic growth.
As the global market grapples with the lessons of 2024, one thing is clear: the future of cocoa—and the millions of lives it supports—depends on bold, collaborative action.
Fabio Scala, CAV Osi
