Cocoa at record prices due to decimated harvests in Ivory Coast and Ghana

Nothing seems to stop the surge in cocoa prices, which are breaking new records almost daily on the markets of New York and London, propelled by catastrophic harvests in Ivory Coast and Ghana, the two largest producers.

“In 20 years I have never seen a harvest like this,” Siaka Sylla, boss of Scapen, a cooperative of 1,500 planters in the Divo region in Ivory Coast, told AFP. The reason: the rain, too abundant, he adds.

With the looming supply deficit, the price of cocoa has more than doubled in both New York and London since the start of 2023.

It now far exceeds the peaks reached in 2011, with the serious post-electoral crisis in Côte d’Ivoire of 2010-2011 which left more than 3,000 dead.

On Tuesday, the contract for delivery in May negotiated in London reached a new historic record, at 4,248 pounds sterling per tonne. Its counterpart traded in New York for delivery in March reached its highest level in more than 46 years, at $5,288 per tonne.

“It seems that it is only a matter of time before the price of cocoa in New York heads towards the all-time high of 1977 at $5,379 per tonne,” said Carsten Fritsch, analyst at Commerzbank.

The decline in production has been a major catalyst for the price explosion over the past 12 months.

Farmers in West Africa have reported the development of diseases in crops after heavy rains, including black pod disease — which causes cocoa pods to blacken and rot due to excessive humidity.

“Very tough campaign”

However, cocoa needs a subtle alternation between sunshine and precipitation to fully flourish.

Ivory Coast is by far the leading cocoa producing country in the world, followed by Ghana. Between them, they provided almost 60% of the total production for the 2022/23 harvest, according to estimates from the International Cocoa Organization (ICCO).

As of July 2023, the Coffee-Cocoa Council (CCC), the regulatory body for the sector in Ivory Coast, had suspended the sale of export contracts for the current campaign due to the heavy rains which affected the fields of cocoa trees.

“It’s a very tough campaign […]. We will perhaps reach 1900 tonnes compared to almost 3000 last year,” laments Siaka Sylla. “But there are cooperatives where it is worse, not even 200 or 300 tonnes…”

According to exporters’ estimates, arrivals at Ivory Coast ports fell by 35% between the start of the harvest season in October and the end of January compared to the same period the previous year. , says Carsten Fritsch.

The El Niño threat

The cocoa market “is also likely to face a supply deficit during the current 2023/24 agricultural campaign, the third in a row”, underlines the analyst.

Because after the heavy rains, drought risks hitting in turn.

Traders are indeed worried about “another year of insufficient production” caused by the El Niño climatic phenomenon “which threatens West African crops with hot and dry weather”, explains Jack Scoville, analyst at Price Futures Group.

The next harvest could suffer, leading to a prolonged global supply deficit, says Ole Hansen, analyst at Saxobank.

El Niño, typically associated with rising temperatures, droughts in some parts of the world and heavy rains in others, is expected to last until April.

Climate change is already a challenge for cocoa cultivation.

Six major regions of Ghana cultivate the precious bean: the Eastern, Ashanti, Brong Ahafo, Central, Volta and Western regions. But due to fluctuating rainfall and declining soil fertility, production has shifted westward.

Not to mention, experts note, that the surge in prices for the precious brown bean could dampen demand. Which would represent a double punishment for the farmers.

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