Spike in Cocoa Prices Might Make Chocolate More Expensive (2024)

FAQs

Spike in Cocoa Prices Might Make Chocolate More Expensive? ›

Candy makers expect to increase prices to combat a global supply shortage of cocoa beans. Cocoa prices have hit a 47-year high, and have more than doubled over the past year, according to a new report from Wells Fargo.

Here's why cocoa costs more in 2024

So, why are you paying more for chocolate these days? A lack of supply. Extreme weather conditions have impacted the supply of cocoa. The majority of the world's cocoa beans are grown in West Africa, and extreme weather has resulted in harsh growing conditions.

Factors like weather, disease and market speculation have contributed to the spike, with West Africa in particular seeing negative impacts from drought. Cocoa farmers struggling to further invest in their land has also led to lower production of the crop, a JPMorgan report from April said.

The small indulgence of chocolate is becoming a more costly one. Soaring prices for cocoa beans recently hit a record $12,000 a tonne: roughly four times last year's price.

The cocoa industry is facing its worst supply deficit in decades, driving cocoa prices to new heights. Yes, you read that right – cocoa prices have soared to their all-time high, with futures tripling in cost since last year, up a staggering 130% in 2024.

Chocolate is a commodity and therefore its price fluctuates based on supply and demand. Factors such as global production levels, weather conditions and crop disease play significant roles in shaping price trends.

Expert-Verified Answer

If the price of chocolate increases, in the market for chocolate this will cause a decrease in demand -- a leftward shift of the demand curve. This is because chocolate is considered a relatively elastic good, meaning that as the price of chocolate increases, consumers tend to buy less of it.

The Root of the Chocolate Shortage

For the past three years, the cocoa industry has grappled with underwhelming harvests, significantly driving up prices. These price hikes have put immense pressure on cocoa processors, critical in converting cocoa beans into cocoa butter and liquor for global chocolate production.

The Netherlands tops the list as the world's largest importer of cocoa beans, with an import value of $2.2 billion USD in 2023.

Rich in iron, flavonoids, and antioxidants, dark chocolate is perceived as a healthier alternative to regular chocolate, resonating with health-conscious consumers. The rising consumer awareness about the nutritional benefits of dark chocolate is expected to continue propelling its demand in the coming years.

Which chocolate is so expensive? ›

Affordability: Store-bought chocolate, especially mass-produced brands, is typically more affordable than craft chocolate or the cost of premium ingredients used for homemade chocolate.

Limited Cocoa Supply Means Higher Chocolate Prices

The prices of these commodities are driven, for the most part, by the commodities market, which sets the price based on supply and demand levels and can result in varying levels of volatility on commodity prices. Overall, the greatest price factor is the cost of cocoa.

The rise in cocoa prices is largely due to a global cocoa shortage. Climate change-induced drought has ravaged crops in West Africa, which contributes around 80% of the world's cocoa output. According to the International Cocoa Organization, global cocoa supply will decline by almost 11% over the 2023/2024 season.

Why is chocolate getting so expensive? A lot of ingredients go into a chocolate bar, including sugar and milk, but the one which gives chocolate its namesake—cocoa—is in particularly short supply at the moment.

Poor harvests due to extreme weather, pests and disease in Ghana and the Ivory Coast, which produce most of the world's cocoa, have hurt supply.

Hershey raised its candy prices last year to offset rising costs and last month implemented what it called a “small” price increase for grocery store items such as chocolate baking chips and syrup. But there may be a limit to how high prices can go.

Another Cocoa Shortage

Production is highly concentrated in Ivory Coast and Ghana, which leaves the market very vulnerable to what's happening to crops in those countries. Output in Nigeria and Cameroon has been stuck in a small range for a long time, and rivals in Asia have seen declines.

David Branch, vice president of Wells Fargo's Agri-Food Institute, believes that while the hike in sugar is a major factor behind candy inflation, it's not the sole driver. “The cost of ingredients is up by a lot, inflation is up and transportation costs are higher than they were two years ago.