REPLAY FROM MARCH 2024: How Chocolate Prices Reflect Global Dynamics

I came across a news story this week that hit very close to my heart: Cocoa Futures Hit All Time Highs: For Consumers the worst may be yet to come

The world is facing the largest cocoa supply deficit in more than 60 years. “The worst is still yet to come,” said Paul Joules a commodity analyst for the century old Dutch firm Robobank. Joules went on to say that “major chocolate companies were well-hedged last year and did not immediately pass on high prices to consumers, but, the industry can only absorb costs to a certain extent.”

He warned that consumers might begin to feel the effects of the supply deficit by the end of 2024 or early 2025. The International Cocoa Organization forecasts a supply deficit of 374,000 tons for the 2023-24 season, a sharp increase from the previous season's deficit of 74,000 tons.

So, those of us who are chocolate lovers may soon feel the impact of soaring cocoa prices as the world grapples with its most severe supply deficit in decades, compounded by challenges faced by farmers in West Africa, including adverse weather, diseases, and aging trees. Cocoa futures for May delivery hit an all-time intraday high of more than $10,0080 per metric ton before closing at $9,622, marking a more than triple increase over the past year.

This chart illustrates just how large this chocolate bubble is with prices more than triple their historic level over the past 17 years.

Hershey CEO Michele Buck mentioned last month that the company has a hedging strategy in place to manage price volatility. The National Confectioners Association stated that the industry is collaborating with retailers to control costs and ensure chocolate remains affordable for consumers.

But, Cocoa prices are likely rise sharply over the coming months due to these severe market issues. Chocoholics will likely face higher prices, smaller chocolate bars, or changes in ingredients to reduce cocoa usage. Lovers of dark chocolate will likely see the highest price increases.

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We will keep our eyes on the economic stories around the world, even the price of chocolate so that your portfolio is properly positioned to weather whatever circumstances that arise.