Cocoa prices have reached unprecedented heights, hitting a new peak of $6470 per ton in New York amidst escalating worries over supply shortages across Nigeria and West Africa. The surge, with futures rising by up to 4.6% on Monday, signifies the largest weekly gain since 1999, with London prices also witnessing a notable climb of 3.5%.
Price Surge and Supply Concerns:
The remarkable spike in cocoa prices is primarily attributed to adverse weather conditions such as drought and disease affecting crops in major West African cocoa-producing countries. This development has raised concerns among chocolate manufacturers about potential hikes in production costs, which could ultimately impact consumers.
Signs of dwindling supplies from leading exporters like Ivory Coast and Nigeria have become increasingly apparent, with bean arrivals at export ports significantly lower than previous years.
EU’s Deforestation Law:
In a related development, European coffee producers have urged the European Union to postpone the implementation of a regulation banning cocoa imports from newly deforested areas. This regulation mandates companies to track their cocoa supplies to specific land plots and provide evidence, failure of which could result in substantial fines.
A recent investigation uncovered cocoa illegally grown in Nigeria’s Omo Forest reserve being shipped to chocolate factories worldwide, implicating major agro companies.
Impact of Climate Change:
Furthermore, the adverse effects of climate change, notably the El Nino weather phenomenon, have disrupted cocoa harvests in major West African cocoa-producing nations like Ghana and Ivory Coast. This has led to abnormal weather patterns, including droughts and floods, with predictions indicating the persistence of these conditions until April.
The changing climate is significantly altering agricultural practices, with Ghana experiencing declining soil fertility and erratic rainfall, prompting a shift in cocoa production towards western regions.
Conclusion:
As cocoa prices continue to soar and supply concerns persist in West Africa, stakeholders in the cocoa industry are closely monitoring developments, anticipating potential impacts on production costs and consumer prices.
Credit: Nairametrics
