In the new agricultural season, the governments of Côte d’Ivoire and Ghana, the world’s largest cocoa producers, have decided to once again raise the purchase price to farmers to new historic highs. The price hike is due to the global drop in production, ‘the biggest in 60 years’, according to the International Cocoa Organisation (ICCO), as a result of climate change in West Africa.
In October, in an unprecedented decision, the government of Côte d’Ivoire, the world’s largest cocoa producer, decided to raise the purchase price for farmers by 20 per cent to 1800 CFA francs (around 191 meticals) per kilo, once again hitting an all-time high. The increase is even more significant if we consider that, at the end of 2023, the price was ‘only’ 1,000 CFA francs (106 meticals) per kilo.
It should be remembered that in Côte d’Ivoire, the purchase price is set in advance by the state at the start of each agricultural season. Cocoa prices are therefore less affected by market fluctuations than in other countries like Cameroon, where the system is liberalised. Côte d’Ivoire’s cocoa accounts for around 40% of world production (over two million tonnes) and contributes 14% of GDP, providing around one million jobs and supporting five million people.
The new price, equivalent to 3060 dollars per tonne, is slightly higher than in neighbouring Ghana, the world’s second largest producer with a global share of 20%, where prices are also set by the state. In September, the government had also decided to raise the price of grain by 45 per cent for the 2024-25 campaign, which runs from October to June.
According to the authorities, the price hike is aimed at curbing smuggling between Côte d’Ivoire and Ghana, as well as illegal trade to other neighbouring countries such as Liberia and Guinea, which buy the product at prices closer to those on the global market.
Cocoa prices on the futures markets at historic highs
As far as global cocoa prices are concerned, the price has soared throughout 2023, surpassing 10,000 dollars per tonne on the New York futures market earlier this year. It peaked at 12,261 dollars in April and has since fallen until stabilising at 7,800 (the current price), due to improved production expectations for the 2024-25 campaign. On the London market, prices for delivery since September this year have also risen by around 170% compared to January.
The surge in prices is due to the decline in world cocoa production, which has been going on for three agricultural years now, estimated at 11% in the current campaign, according to data from the International Cocoa Organisation (ICCO) based in Côte d’Ivoire. In its latest report, the ICCO increased its estimate of the global cocoa deficit in 2023-24 to around 462,000 metric tonnes, the biggest shortfall in 60 years.
The drop in production is due to the impact of climate change, particularly the El Niño phenomenon, which has led to an increase in rainfall and the proliferation of diseases and pests. At the same time, many crops are already at the end of their useful life and farmers are finding it difficult to buy new, more resistant seeds, as well as pesticides and fertilisers, which have become more expensive since the war in Ukraine.
On the other hand, according to the Wells Fargo Agri-Food Institute ‘the current drier and hotter weather conditions also cause the wind to kick up dust and prevent sunlight from reaching the crops’.
Chocolate producers skimp on cocoa quantities
Faced with this situation, the big chocolate manufacturers, such as Nestlé, Mars and Hershey, are trying to avoid passing on the increased costs in their prices. The most popular tactic, known as ‘shrinkflation’, consists of optimising packaging and reducing the size of the product, without lowering the price. Other measures include reducing the amount of cocoa used in manufacture and increasing the proportion of other ingredients, such as caramel, fruit or nuts.
It should be noted that according to data from the United Nations Food and Agriculture Organisation, the African continent is responsible for around 70% of the cocoa produced in the world. Côte d’Ivoire is the clear leader (with 2.2 million metric tonnes), followed by Ghana (1.1 million). Cameroon and Nigeria are the fifth and sixth largest producers, with Indonesia being the most important on the Asian continent and Ecuador and Brazil on the American continent.
A third of the annual harvest is processed in Europe. The Netherlands alone grinds 590,000 tonnes, or 12% of the seeds. Switzerland, meanwhile, processes around 55,000 tonnes of cocoa, corresponding to around one per cent of the world’s cocoa production.
Text: Jaime Fidalgo
