Cocoa Prices Surge Amid Supply Shortages

Cocoa prices have surged dramatically this year, primarily driven by adverse weather conditions and crop diseases in West Africa, which has resulted in significant supply shortages. As a result, cocoa futures have soared over 80% year-to-date, raising concerns for consumer-facing companies, particularly those in the chocolate manufacturing space, such as Hershey's. Olen Hond, the Head of Commodity Strategy at Saxo Bank, pointed out that the market is consolidating at high levels, indicating that production incentives have yet to bear fruit. Although global chocolate demand remains robust, the high prices may hinder production owing to the slow response of farmers in West Africa to elevated farm gate prices. Eventually, relief from high cocoa prices might not materialize until 2026, as farmers will require increased financial support for fertilizers and pesticides to combat crop diseases. The impact of extreme weather events on production routes is a pressing concern, particularly given the historical weather events in the USA during 2023, which have implications for global agricultural outputs, including cocoa and coffee. The sustainability of cocoa production hinges greatly on adapting farming practices to address these increasing weather extremes while ensuring that farmers can financially thrive amidst the fluctuating commodity prices.