Global cocoa prices have soared to record levels, with the latest figures showing a dramatic increase that has shaken markets and manufacturers.
Reports from the BBC and CNBC highlighted the escalating situation as dry weather conditions in West Africa, a key cocoa-producing region, have severely impacted crop yields.
Cocoa future prices hit a new all-time high of $5,874 per metric ton on Thursday, according to data from the New York commodities market. The price of cocoa has increased by around double since the beginning of last year. The price is starting to ripple through to consumers and squeeze the margins of major chocolate manufacturers.
Citi analyst Thomas Palmer was quoted by Yahoo Finance as saying that “the magnitude and pace of recent price increases seem to be unprecedented.”
Hershey says “historic” cocoa prices expected to “limit earnings growth”
Hershey, one of the world’s largest chocolate makers, has issued a warning that the historic rise in cocoa prices is expected to constrain earnings growth for the current year.
In a press release, Michele Buck, Hershey’s CEO, said: “While historic cocoa prices are expected to limit earnings growth this year, we believe our strong marketing plans, innovation and brand investments will drive top-line growth and meet consumers’ evolving needs.”
The impact of rising cocoa prices is not isolated to Hershey. Mondelez, the parent company of the Cadbury brand, also voiced concerns over increasing costs for cocoa.
Weather conditions
The cause of the surge in the price of cacao traces back to poor harvests in West Africa, exacerbated by the El Niño weather phenomenon, which has led to drier conditions in Ghana and Ivory Coast – the globe’s leading cocoa bean producers.
The implications for the chocolate industry are significant, as companies grapple with the dual pressures of maintaining production and managing consumer price expectations in a rapidly evolving market landscape.