Fitri has over 20 years of experience in financial journalism. She has contributed to various international media outlets, including Dow Jones Newswires, Bloomberg, and Reuters,…
Consumers may have to brace for chocolate treats on supermarket shelves to become more expensive and their favorite chocolate bars shrinking in size or not tasting as good as they used to, as cocoa prices have recently hit new record highs.
Sparked by unprecedented deficits due to reduced output from Ivory Coast and Ghana, cocoa prices – both in New York and London futures – have soared in recent weeks following a steady rise in the past two years.
In March, New York cocoa futures briefly reached $10,000 per ton for the first time, while London cocoa hit a record of above ￡8,000.
The two West African nations supply over 70% of global cocoa beans output.
On the production side, confection-makers such as Hershey’s, Mondelez, Barry Callebaut, and grinders are likely to be impacted by soaring raw material prices.
Record-high cocoa bean prices could further inflate costs alongside higher prices for other ingredients, such as sugar, threatening their profits.
With the global cocoa market expected to be in deficit for the third year in a row in 2024, how high can cocoa prices go?
Let’s explore the latest expert insights and cocoa price predictions for 2024, 2025, and beyond.
Key Takeaways
Deficits in the cocoa market are expected to significantly widen in the 2023/2024 season.
Surging prices could start affecting grindings in the second half of 2024.
Higher prices may attract other producers to increase output.
The impact of higher cocoa prices can affect retail prices of cocoa products in six to 12 months.
The signs of an uptrend in cocoa prices began in 2021 despite the market facing excess supply during that year. Higher production, driven by favorable weather, outstripped constrained demand caused by the COVID-19 pandemic, which forced restaurants, cafes, and hotels to either shut down or operate at limited capacity.
Festive gatherings, such as birthdays or religious holidays when chocolate treats are often served, were also restricted to prevent the spread of the virus.
According to data from the industry group the International Cocoa Organization (ICCO), global cocoa bean output rose 10.4% to 5.24 million tons in the crop year that began from October 2020 to September 2021. Demand from grinders also increased in the same period but still lagged behind supply. In 2020/2021, grinders processed 4.95 million tons of cocoa beans, up 5.4% from 4.65 million tons in 2019/2020.
Grinders process cocoa beans into cocoa liquor, which is later extracted into cocoa butter and cocoa powder. Cocoa butter is used to make chocolate bars, coverture, and cosmetics, while cocoa powder is used to make chocolate beverages, biscuits, and cakes.
Rising Inflation Limited Price Gains in 2021/2022 Season
In the following 2021/2022, cocoa prices climbed further as the deficit began to widen. ICCO’s data show cocoa beans output dropped 8% to 4.82 million tons in 2021/2022 compared to 4.99 million tons of grinding demand, resulting in a deficit of 214,000 tons for the crop year.
ICCO attributed the lower production for the 2021/2022 season to a 6% drop in Ivory Coast caused by unfavorable weather conditions and the devastating spread of the Cocoa Swollen Shoot Virus Disease (CVVD), which reduced Ghana’s output by 34%.
The disease, spread by insect vector mealybugs, could cause significant production losses where cocoa plantations are predominantly owned by smallholder farmers who struggle to maintain their trees due to limited financial resources.
Cocoa prices in New York rose nearly 2% year-on-year in 2022, trading at around $2,600 per ton at the end of the year. In London, cocoa futures surged 21.22% to close the year at more than ￡2,000/ton.
The gain in prices was limited by subdued demand amid a global economic slowdown due to rising inflation despite a supply deficit.
Russia’s invasion of Ukraine in February 2022 also contributed to gains in cocoa prices.
The war had increased farm costs, especially fertilizer, making it more expensive for farmers to tend to their crops. Fertilizer prices soared in the months following the war as Russia limited exports of natural gas, which is used in making fertilizer.
According to the ICCO, the prices of three types of fertilizer commonly used in cocoa plantations reached their highest level over the three years from January 2019 to March 2022. The price of d-ammonium phosphate (DAP), used to enhance growth, rose 26% to $938 per ton in March 2022 from $747 in February.
Russia is also the world’s third-largest fertilizer producer, according to the World Population Review.
Deficits Extended for 2022/2023 Season
In the following year, cocoa prices’s rally began from Q1 2023, with New York cocoa futures hitting $3,000 in early April 2023 and London cocoa futures exceeding ￡2,200/ton due to persistent deficit despite improving output.
Heavy rains had affected the growth of young cocoa pods, the spread of cocoa-related diseases, such as black pods, which caused cocoa pods to rot, and hampered drying of harvested cocoa beans. Rains also hampered transporting beans to ports as flooding in major roads made some cocoa regions difficult to access.
In addition, fertilizer prices had remained elevated because of the ongoing war in Ukraine, prompting farmers to reduce fertilizer use and making cocoa trees prone to cocoa-related diseases.
ICCO’s data showed production rose by 3.5% to 4.99 million tonnes in 2022/2023, but it was not enough to meet demand, which increased by 0.5% to 5.02 million tonnes as activity resumed to normal with COVID-19 restrictions fully lifted.
However, the deficit narrowed to 74,000 tons from 214,000 in 2021/2022 due to improved production.
Cocoa prices soared 61.38% in 2023 in New York, closing the year at over $4,300/ton. In London, cocoa futures surged 70% to end the year at ￡3,500/ton.
Ole Hansen, head of commodity strategy at Saxo Bank, said in February:
“In the last year, we’ve seen the adverse weather, really hot weather, lowering the production. At the same time, we also have the rising cost of pesticides and fertilizers, making it difficult for farmers to afford these key ingredients to maintain a healthy crop. And that’s also led to pests. This is the impact we’re seeing right now with arrivals to ports in Ivory Coast from this current reduction in diseases from October to March down 40% on last year.”
Lower production was critical because a lot of the cocoa beans had been pre-sold to consumers or cocoa and chocolate manufacturers, he added.
Hansen said:
“And if they can’t get it delivered, then obviously they have to go somewhere else for deliveries, and that’s why we’re seeing the futures price getting squeezed to the extent we are witnessing right now.”
Later in 2023, the war between Israel and Palestinian Hamas, which broke out on October 7, further fuelled cocoa prices to rally as the tension began to spread.
Houthi rebels in Yemen, who support Hamas, began attacking commercial ships in the Red Sea and prompted shippers to reroute via the southern tip, which increased freight costs.
Factors Influencing Cocoa Prices in 2024: West African Output Still Dominant
At the time of writing on April 1, the London cocoa contract for immediate delivery in May was trading at ￡8,270 per ton, surging 138.5% so far this year. In New York, the May cocoa contract was trading at $9,740, rising 132.75% year-to-date (YTD).
Several factors could influence whether cocoa continues its surge. Let’s examine them.
West African Output Shortfall
ICCO’s February 2024 report showed that since the start of the 2023/2024 season in October last year, cocoa bean arrivals from plantations to Ivorian and Ghana ports have dropped 28% and 35% from the same period last season.
Paul Joules, a commodity analyst at Amsterdam-based Rabobank, in a podcast on? March 1, said the production problem in Ivory Coast and Ghana is an accumulation of the widespread cocoa-related disease which impacts yield; farm gate prices that were insufficient to provide incentives for farmers to increase production; and reduction in yield in aging trees. Joules said:
“So as these factors have accumulated, you could argue that these are systemic issues and more sort of medium to long term trends which could take a while to fix. Hence why we’re seeing this huge price premium in the market.”
In February, ICCO forecasted Ivory Coast’s cocoa bean output to fall by 19.6% to 1.8 million tons in the 2023/2024 season from 2.24 million tons in the previous season. Ghana is projected to produce 580,000 tons of cocoa beans in 2023/2024, an 11.31% drop from 654,000 tons in the 2022/2023 season.
Overall, West Africa is expected to produce 3.16 million tons of cocoa beans in the 2023/2024 season, a 13.6% drop from 3.66 million tons in 2022/2023 due to the anticipated fall in Ivorian and Ghana production.
Joules expected the decline in production in Ivory Coast and Ghana to be less sharp than the arrivals indicated. He said that arrivals could potentially improve with the mid-crop, which is coming from April to September.
Cocoa is harvested twice a year. The main harvest runs from October to March, while the mid-crop, which usually has a smaller volume, runs from April/May to August/September
Deficit to Persist
With a projected lower production from West Africa, ICCO estimated deficits will be widened this year.
Global cocoa bean output may fall by 10.9% to 4.45 million tons in the 2023/2024 season from a revised estimated production of 4.99 million tons in the 2022/2023 season. This will leave a projected deficit of 374,000 tonnes to meet grinding demand, which is estimated to reach 4.78 million tons. The estimated deficit for 2023/2024 represents about a 400% increase from the 74,000 tons deficit in the previous 2022/2023 season.
The stock-to-grindings ratio is also forecast to reach 29.2% in 2023/2024, the lowest in the past ten seasons since 2013/2014, according to ICCO’s estimate in March.
The stock-to-grinding ratio is used to assess the availability of cocoa beans for processing activities. A higher stock-to-grindings ratio suggests that there is enough cocoa to meet demand for cocoa processing. Lower stock-to-grindings ratio, on the other hand, indicates scarcity.
Jack Scoville, Vice President at Chicago-based Price Futures Group, said in a note on April 1:
“The availability of Cocoa from West Africa remains very restricted and projections for another production deficit against demand for the coming year are increasing. Ideas of tight supplies remain based on more reports of reduced arrivals in Ivory Coast and Ghana continue. Demand continues to be strong, especially from nontraditional buyers of Cocoa.”
Output From Other Cocoa Producing Nations
Surging prices could attract farmers from other cocoa-producing nations to increase their output and benefit from the price rally.
Joules of Rabobank said:
“We definitely will see a race from other producers trying to increase production because they are getting closer to terminal prices. We know that farmers and some of the other producing countries are making excellent margins. So, of course, it would make sense to really try and boost yields as much as possible through increased fertilizer and input usage.”
Ecuador and Brazil, said Joules, are among countries that can potentially increase output amid the shortfall in West African output. However, due to their modest percentage of world output, increased production from other countries may not be adequate to cover the output gap.
Joules said:
“Brazil represents about 5% of global production and Ecuador only about 10%. So really, all of the main production in the world is still focused in West Africa, mainly Ivory Coast. So if we have production issues there, we’re going to have problems for global supply.”
Lower Demand
Stronger prices last year had not bitten grinders just yet. Some countries recorded a small drop in grindings to respond to higher prices, but grindings increased in Ivory Coast, Brazil, and Germany. In the 2022/2023 season, grindings rose 0.5% to 5.02 million tons from 4.99 million tons in the previous season.
Analysts expected the skyrocketing prices could hit grinding demand in the later part of this year.
Rabobank’s Joules said:
“Given the fact we have had this major increase in price. Some people were calling for demand destruction back then. And we haven’t seen that in the figures. So, the question is when we’ll begin to see this, you know, this big, big drop because you would expect to see a dry-up in supply, and you would expect to see that reflected in the grinding status. So potentially, we could see this in sort of H2 2024.”
On the consumer side, it will take longer for the soaring price to affect consumer demand.
Ole Hansen, the head of commodity strategy at Saxo Bank, said it could take between six to 12 months for price hikes to be reflected in retail prices.
“Nevertheless, in the forthcoming period, consumers should brace for an uptick in chocolate bar prices. Additionally, the trend of shrinkflation is likely to become more pronounced. This practice involves reducing the size of chocolate bars or the quantity of chocolates in a package while keeping prices constant. Consequently, while there might not be a stark rise in the price tags of chocolate items, the quantity offered for the same price will see a reduction.”
Cocoa Price Forecast for 2024
Analyst/source
Cocoa Price Forecast 2024
BMI
￡4,687.80/ton
Trading Economics
$10,030.66/ton (end of Q2)
Wallet Investor
$10,111.21 (December 2024)
GovCapital
$10,316.66 (by 31 December 2024)
In its cocoa price forecast 2024 published on March 21, BMI forecasted London cocoa futures to trade at an average of ￡4,687.80/ton in 2024, more than double the estimated 2023 average at ￡2,651.42/ton.
Analysts at BMI, a Fitch Solutions company, wrote:
“Cocoa remains the clear outperformer, with a continued rally in prices through 2024.”
“The key question, and also the toughest, is how much higher cocoa prices can go. They need to go to levels where we start to see significant demand destruction. We are seeing some of that already, but not enough to bring the market back into balance and ease tightness concerns.”
Cocoa Price Forecast for 2025
Analyst/source
Cocoa Price Forecast 2025
BMI
￡3,984/ton
Trading Economics
$10,868.58 in 12 months (as of 1 April 2024)
Wallet Investor
$10,631.63 (December 2025)
GovCapital
$12,337.34 (by end of December 2025)
London cocoa prices were expected to fall to ￡3,984 per ton in 2025, from an estimated ￡4,687.80/ton in 2024, according to BMI’s latest forecast. BMI did not provide a reason for the drop in its cocoa price forecast for 2025.
Trading Economics, in its forecast as of 1 April, foresees cocoa prices in New York to trade at $10,868.58 in 12 months.
Cocoa Price Forecast for 2030
Analysts currently do not provide exact cocoa price forecasts for 2030. Forecasting cocoa prices for such a distant future is highly complex due to a multitude of unpredictable factors, such as the weather and the spread of cocoa-related diseases.
Moreover, cocoa cultivation is predominantly carried out by smallholder farmers who often lack financial resources to maintain their crops.
Weather patterns, which are increasingly erratic due to climate change, further damage output in most cocoa-producing countries, which have already battled low yields due to underinvestment.
On the product side, chocolate companies will be affected by cocoa prices volatility.
With cocoa prices skyrocketing, companies could use other products to manage costs. For example, they can use palm oil products to substitute cocoa butter. However, companies have limited options for substitution products.
On the other hand, demand for chocolate products is predicted to rise in the coming years, particularly from emerging markets.
While analysts did not offer long-term forecasts, algorithm and machine learning-based price forecast services provide such distant predictions.
WalletInvestor’s cocoa price predictions saw the price reach $10,111.21/ton in December 2024, rising to $ 11,116.11 per ton by December 2026. At the time of writing, it expected cocoa to trade at $12,485.59 by March 2029.
GovCapital also projected cocoa prices to trade at $10,316.66/ton by the end of December 2024, surging to $15,024.18/ton in 2026. Cocoa prices were predicted to continue climbing within the next three years, reaching $22,764.14/ton on April 4, 2029.
You should bear in mind that forecasts from algorithm and machine learning-based price prediction services can be inaccurate.
The Bottom Line
The surge in cocoa prices may last through 2024, as supply shortfalls caused by years of systemic issues, such as lower yields due to aging trees and cocoa-related disease, remain.
The sheer scale of Ivory Coast and Ghana’s production in the global cocoa market makes it impossible for other producing countries to make up for any gaps.
However, analysts are uncertain how high cocoa prices can go in their longer-term cocoa price predictions. Still, the overall trend mainly remained bullish.
Do your own research and always remember your investment decision depends on your attitude to risk, your expertise in the commodity market, the spread of your portfolio, and how comfortable you feel about losing money.
The information in this guide does not constitute investment advice and is meant for informational purposes only.
FAQs
Is cocoa a good investment?
Cocoa is one of the most popular ingredients in food and beverages, with demand continuing to rise, particularly from developing countries. However, cocoa prices are very volatile, mostly because its fundamentals are influenced by highly unpredictable factors, such as the weather and the domination of small farmers in cultivation. If you decide to invest in cocoa, you should take these risks into account and consult with your financial consultant.
How high cocoa price can go?
Machine-learning cocoa price prediction service GovCapital projected cocoa prices could reach over $22,000/ton in April 2029. Note that algorithm-based price forecasts can be inaccurate, so always conduct your own analysis before making any investment decisions.
Should I Invest in Cocoa?
Over the previous two years, cocoa prices have risen steadily to record highs. According to price forecasts that were available, cocoa prices were expected to rise due to limited supply and high consumer demand. Agricultural commodities, however, are among the most volatile investments. You should always conduct research to understand the risks before investing in cocoa.
Fitri has over 20 years of experience in financial journalism. She has contributed to various international media outlets, including Dow Jones Newswires, Bloomberg, and Reuters, before joining Techopedia. She spent the first 15 years of her career covering commodity and energy news, later transitioning to general financial writing. These days, she conducts interviews with industry players and analysts and reports on international conferences. Fitri holds a degree in International Relations, supporting her expertise in financial journalism. She occasionally serves as a guest trainer for journalistic training and as a moderator for panel discussions.
