Why is it not noticeable in the price of chocolate?

The price of cocoa has plunged 45% since the beginning of the year. The fall only partially offsets the evolution of the raw material over the last two years, in which reached historical highs very close to $12,000 per ton. The decline is due to the prospect of a good harvest in the Ivory Coast – which together with Ghana accounts for 60% of world production – and the end of the speculation that triggered its price last year. Despite this, the latest detailed CPI data, relating to October, confirm that chocolate is up more than 16% compared to the same month a year ago. Why is the evolution of cocoa not noticeable in its price?

The price of cocoa is around $5,000 per ton in the futures market, which is why it has decreased by more than 50% in the last year, although it remains stable. well above the average that was recorded between 2012 and 2022 (around $2,525 per ton). Coface analysts recall that, although the effects of El Niño and the swollen shoot virus – which ends up causing the reduction of fruits and the death of the tree – have subsided, the supply deficit persists and the problems that already affected production persist.

“The plantations are aging, investment is still too limited and production is very geographically concentrated,” they explain, and emphasize that the cocoa sector is “extremely vulnerable” to any supply disruption in this region. This context coincides with sustained growth in global demand, which increases between 2% and 5% each year driven by Asia and high-end segments.

Ethical, organic and low-sugar chocolates are gaining ground, as is certified cocoa (Fairtrade, Rainforest Alliance). Despite West Africa’s leadership, Latin America, particularly Ecuador, aims to surpass Ghana in 2027, with an annual production of 650,000 tons of cocoa.

Humanitarian and environmental problems

From Coface they point out how the traceability initiatives imposed by the EU and the Reference Price for a Decent Income (PRRD) mechanism implemented by the governments of Ghana and Côte d’Ivoire —that establishes a minimum price for the producer of $3,408 per ton in Ghana and $2,650 per ton in Côte d’Ivoire—are increasing pressure to promote a sustainable and transparent supply chain.

The reality, however, is much more complex. “Faced with extreme poverty, producers are forced to clear new fertile lands,” explains Lauriane Kraskowski, credit and ESG analyst at Crédit Mutuel Asset Management. The expert details how in Ivory Coast the forests that once covered much of the country now represent less than 10% of the national territory.

At the same time, the average income of local producers may be less than a dollar a day, a level of extreme poverty that forces many families to depend on child labor. It is estimated that more than 800,000 children work on cocoa plantations, which represents one in three children in the producing regions, says the analyst.

Forecasts speak of volatility

In the current context, Rabobank analyst Orán van Dort sees it as unlikely that prices will fall below pre-crisis levels in the next two years. “We still have systematic supply problems that persist in the two largest producers in the world,” he points out. The market is, from his point of view, in a period of transition, in which global production moves from the Ivory Coast and Ghana to Latin American countries. “I think that volatility, regardless of the evolution of prices, will remain high,” he adds.

The World Bank’s projections indicate that 2025 will close with a 9% increase in cocoa prices that will accumulate to that registered in 2024. “They will not begin to decline until 2026, when the organization foresees an interannual drop of 6%,” they point out from CaixaBank Research. Meanwhile, the price information agency Expana recently estimated that Ivory Coast production will reach 1.85 million tons in the 2025-26 harvest, a figure similar to that calculated for the previous season by the International Cocoa Organization. The country’s trees have not recovered from the July and August drought, and the pod load is among the worst recorded in two decades, he explains to Bloomberg Andrew Moriarty, senior cocoa manager at Expana.