Whether it’s Cadbury or Galaxy, Lidl or Lindt, the making of every good chocolate bar starts with the humble cocoa bean – to which sugar, milk and whatever else is added to make a treat millions of us enjoy every week.
Bad news may be on the horizon for chocolate lovers, though, as behind the scenes the price of cocoa beans has tripled in a year, blasting through its all-time price ceiling – and rising. In April 2023, one tonne of cocoa beans would cost $2,665 (£2,100). That same amount today would cost $7,296 (£5,800), according to the Federal Reserve Economic Data (FRED).
Given cocoa makes up anything from about 30 per cent of a milk chocolate bar – and 85 per cent or more of dark chocolate – the sudden spike in prices could mean the price of chocolate in stores could be set to rise, and there may even be shortages on the shelves, or changes to recipes, to compensate.
Why are there cocoa shortages?
The reasons for the price spike reveal the complicated story behind the bean that gives us the chocolate bar. Cocoa is, as it turns out, a notoriously difficult crop that is beset by difficulties. Even in the best circumstances with a trained grower, a new cocoa crop planted this year won’t produce any cocoa beans for at least four to five years – though it will then continue to produce cocoa for up to 30 years, although both the quality and yield can drop markedly as the plant comes to the end of its life.
The result is that farmers can’t just switch in or switch out cocoa in the way they can do with some other crops in response to prices. If there’s a shortage of cocoa this year, no one can suddenly produce more – the supply is essentially fixed.
That problem is made even more difficult by where most cocoa is grown. Almost two-thirds of the world’s cocoa is grown in the neighbouring West African countries of Ghana and the Ivory Coast – both of which have been mired in political and economic instability, discouraging investment in cocoa.
Making everything even more difficult for growers is a fungal disease that affects cocoa, known as black pod disease. The disease destroys the cocoa pods of affected trees, and kills some entirely – leading to a loss of around a third of the crop most years. However, the fungus thrives in wet weather (and spreads more easily in it), and West Africa had a particularly rainy winter.
That combination of events would be more than enough to send prices spiking on their own – but prices were for a time driven even higher by financial speculation.
Cocoa is a relatively small market, versus larger crops such as wheat or soy, and so it is more volatile if hedge funds choose to speculate on it. These hedge funds trade “futures”, a term for the right to have one tonne of cocoa delivered to you on a given date, with no intention of ever actually taking inventory of any cocoa. In the 2000s, one trader (unsuccessfully) tried to corner the world’s cocoa supply, earning himself the nickname cocoa-finger in the financial press.
This year, according to reporting by Bloomberg, a hedge fund run by former Merrill Lynch trader Paul Mulvaney managed a much more successful trade on the cocoa market, cashing in on the rapidly rising prices as the weather in West Africa failed to improve.
“Cocoa has rallied primarily because of disease and flooding in Africa,” said one industry insider at a different company. “This has provided some very strong trends that have benefitted commodity trading advisors who follow trends across futures.”
The insider noted that speculation might continue to contribute to rising prices given that there is no obvious way in the short-term to boost supply of cocoa – leaving the prices for the next few years largely dependent on the weather.
The cost impact
Unfortunately for British consumers with a sweet tooth, most of the surge in cocoa prices has yet to show up in the price of a bar on the shelf. The big producers of chocolate use contracts that fix the price they pay for months at a time, delaying the effect of big spikes in the markets.
Those contracts only delay price rises, rather than cancel them forever – meaning that chocolate could be set to get much more expensive. The higher the percentage of cocoa in the bar, the more it is affected by cocoa prices, meaning dark chocolate fans have much more to worry about than those who prefer white.
Some Lindt and Green & Black’s dark chocolate bars are already 32 per cent more expensive than they were last April. Own brand chocolate also tends to rise more sharply as cocoa or sugar prices jump, because the price reflects the cost of ingredients, rather than a brand – Asda’s milk chocolate is up 55 per cent on last year.
Product price change from April 2023 to April 2024
Elsewhere, chocolates are shrinking to avoid price spikes – the consumer brand Which? found over Easter that Mars’ large chocolate egg had shrunk from 252g last year to 201g this year – meaning it is 20 per cent smaller than a year ago.
The world’s big chocolate companies have been trying for decades to make the supply of cocoa more stable and less reliant on Ghana and the Ivory Coast. In 2010, Cadbury invested in the Indian state of Kerala, trying to encourage coconut farmers to also produce cocoa (the two trees can coexist on the same land) – making India the only country in which cocoa beans were grown, harvested, turned into bars, and sold in the same nation.
However, more than a decade on, India still produces considerably less than one per cent of the world’s cocoa supply – and there is no obvious solution to the shortages. For now, there is nothing to be done except hope for better growing weather in West Africa – maybe while stockpiling an extra bar or two.