The meltdown in the cocoa price

Fears over a shortfall of cocoa now look to have been overdone as the price plummets.

The cocoa price has fallen 14% over the past two months, following a spike in September caused by the Ebola outbreak in west Africa. The region grows around 70% of the world's cocoa, and the spread of the disease had raised fears of supply shortages.

But those worries now look unfounded. Fears over Ebola are receding. Demand is soft, especially in Europe. And harvests have been healthy: the International Cocoa Organisation says that the global surplus in 2013/2014 was 53,000 tonnes.

Cocoa is still up 10% year-on-year, but the trend seems to be down, says J Ganes Consulting, a soft commodities specialist. "High prices and shaky economics are not a winning combination for the cocoa market and this is taking the wind out of the bull sails."

Longer term, however, it could be a different story. Cocoa in west Africa is grown by small farms, who are struggling to keep up with demand growth from the $110bn global confectionery industry, according to equity research firm Hardman & Co.

"This combination of fragile upstream production with rapidly growing demand for chocolate confectionery in countries such as India, China and Russia, has raised the spectre of future chronic supply shortfalls of cocoa beans."

Recommended

How high energy prices are driving up food prices too
Soft commodities

How high energy prices are driving up food prices too

High energy prices aren’t just affecting our heating bills, they’re making food more expensive, too. Saloni Sardana explains what’s going on.
21 Sep 2021
The charts that matter: markets cheer Powell’s inaction
Global Economy

The charts that matter: markets cheer Powell’s inaction

Markets were holding their breath for most of the week ahead of the Fed's Jackson Hole Symposium but in the end they cheered Chair Jay Powell's inacti…
27 Aug 2021
Soaring food prices fuel unrest
Global Economy

Soaring food prices fuel unrest

Poor harvests and logistical problems have seen food prices soar, fuelling protests from Haiti to South Africa.
6 Aug 2021
The commodities “supercycle” pauses for breath
Commodities

The commodities “supercycle” pauses for breath

Commodity prices have all surged this year as economies have reopened. But now some raw materials have started to come off the boil.
25 Jun 2021

Most Popular

Properties for sale for around £1m
Houses for sale

Properties for sale for around £1m

From a stone-built farmhouse in the Snowdonia National Park, to a Victorian terraced house close to London’s Regent’s Canal, eight of the best propert…
15 Oct 2021
How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021
Emerging markets: the Brics never lived up to their promise – but is now the time to buy?
Emerging markets

Emerging markets: the Brics never lived up to their promise – but is now the time to buy?

Twenty years ago hopes were high for Brazil, Russia, India and China – the “Brics” emerging-market economies. But only China has beaten expectations. …
18 Oct 2021