PRODUCTION

Cocoa production is highly sensitive to weather conditions and the latter has very often played a role in the gains or losses of cocoa prices. Heavy rains in West Africa are reported to have triggered the Cocoa Swollen Shoot Virus Disease (CSSVD) and the spread of Black pod diseases. These fateful incidences including high costs of inputs, have not spared the two leading producers (i.e., Côte d’Ivoire and Ghana) and affected their volume of production. In Ghana, as supplies were below expectation for the season, cross boarder trading and inability to fulfill cocoa contracts amongst others led the government to end the 2022/23 season earlier than normally scheduled. To halt further disruption to the marketing of cocoa, the Ghanaian government officially opened the 2023/24 season on 8 September with the producer price pegged at 20,943.84 Ghana cedis (US$1,821) per tonne. This reflects a 64% rise compared to the 2022/23 season’s price of 12,800 GH cedis per tonne. As may be recalled, in July, supply concerns led Le Conseil Café et du Cacao to cut off forward export sales for the 2023/24 season. On the back of projections of an El Nino occurrence, the expected below average rainfall would result in reduced soil moisture. This is raising concerns on the size of the 2023/24 crop and likely to cause further price rallies.

RETAIL CHOCOLATE SALES

Profit margins of chocolate manufacturers are likely to be at risk because of high cocoa prices including other ingredients such as sugar. Will this lead to a repeat of chocolate shrinkflation as manufacturers grapple with high prices of cocoa beans?11 Or will the soaring cost of cocoa be passed on to consumers and will we see more pushbacks from retailers if manufacturers increase their prices? One hopes not, but the likelihood that there will be a return of price dispute amongst retailers and manufacturers cannot be ruled out. Couple of months ago, Belgian retailer, Colruyt, rejected Mondelez price hikes on its products.22 Similar instances for other food products has happened in other countries. For example, in UK, Tesco and Kraft Heinz33 , in US, Walmart and CPG manufacturers44 and in the Netherlands, grocer

1 https://www.thechocolatejournalist.com/blog/craft-chocolate-shrinkflation
2 https://www.just-food.com/news/mondelez-embroiled-in-pricing-spat-with-belgian-grocer-colruyt/
3 https://www.just-food.com/news/kraft-heinz-tesco-settle-differences-in-uk-price-dispute/?cf-view
4 https://www.just-food.com/news/walmart-kicks-back-at-cpg-manufacturers-over-price-hikes

Jumbo with Nestlé and Mars15. If it has happened for other food products, with the current high cost of cocoa beans, retailers and consumers should not be taken by surprise if chocolate bars reduce in size or increase in price. Data from Euromonitor depicts that retail growth of chocolate confectionery is rising faster in terms of value than volume. Between 2022 and 2023, the global retail chocolate confectionery market size is estimated to increase in value by approximately 6% and in volume by1.4%. It is worth noting that between 2021 and 2022, the percentage growth for global retail chocolate confectionery market size in terms of value and volume were 2% and -0.5% respectively.

FUTURES PRICE DEVELOPMENTS

In response to the certainty of a global supply shortfall, prices of cocoa futures contract continued their upward trend in August. Figure 1 shows price movements of the first and second positions on the London and New York cocoa futures market at the London closing time in August 2023, while Figure 2 presents similar information for the previous year. Prices for the month under review averaged US$3,453 per tonne and ranged between US$3,323 and US$3,730 per tonne in London. In New York, the average price was US$3,416 per tonne and ranged between US$3,269 per tonne and US$3,633 per tonne. A year ago, the front-month prices were at an average of US$2,041 per tonne and ranged between US$2,100 and US$ 2,154 in London. In New York it settled at an average of US$2,369 and ranged between US$2,278 per tonne and US$2,430 per tonne.

Prices maintained their high stance during the month under review. The obvious slight prices decline occurred during the second week of August – precisely 10th August. Compared to US$3,449 per tonne at the start of the month, prices fell by 4% to US$3,323 per tonne in London and by 8% from US$3,555 per tonne to US$3,269 per tonne in New York. This was in reaction on an account of improved weather conditions in Côte d’Ivoire coupled with subdued global economic growth which could soften demand. This decline in prices was short-lived and thereafter prices reverted and rallied to US$3,730 per tonne in London and US$3,633 per tonne in New York by the end of the review period.

SUMMARY OF REVISED GLOBAL SUPPLY AND DEMAND FORECASTS FOR THE 2022/23 SEASON

The latest issue of the Secretariat’s Quarterly Bulletin of Cocoa Statistics (QBCS) highlights that the global cocoa market is contending with faltering production, growth in demand and high prices. Global production is projected to be up by 2.3% to 4.938 million tonnes. With a slack in demand, grindings are expected to fall by 0.2% to 5.003 million tonnes. Copies of the Quarterly Bulletin of Cocoa Statistics, in Microsoft Excel and Adobe PDF formats, can be ordered from the ICCO eShop: www.icco.org/shop or by email: statistics.section@icco.org