Cocoa prices have seen strength due to cocoa supply concerns this year amid Nigeria’s dwindling cocoa output. LIFFE Cocoa futures at the time of writing traded in London for GBP 3,557 per ton has a year-to-date of 72.4% and it is not far from its 52-week high of GBP 3,634 per ton.
The price of actual cocoa is usually determined globally using the preferred London Cocoa Futures contract.
The main cocoa producers of West Africa include Côte d’Ivoire, Ghana, Nigeria, and Cameroon, and together account for around 70% of the world’s supply.
International Cocoa Organization shows that Nigeria, the most populated African country is the fourth largest cocoa producer in the world, accounting for more than 5% of the world’s supply.
However, it lags far behind the world’s largest producers, Côte d’Ivoire and Ghana, which together supply more than half of global demand and are often highlighted in corporate sustainability programs.
Nigeria’s cocoa harvest is expected to fall below 300,000 tons this year as aging trees and pest infestations reduce yields.
World Bank trade data and Nigeria’s export council, reveal more than 60% of Nigeria’s cocoa heads to Europe and about 8% to the United States and Canada.
The European Union, the largest buyer of West African cocoa, passed new deforestation-free product regulations in the second quarter of this year, which require companies selling cocoa and other raw materials to certify that they are not causing deforestation.
Experts from the Cocoa Institute of Nigeria have set up the Trace Project in six southern states to combat deforestation in cocoa production and ensure that Nigerian cocoa is not rejected in Europe.
This month the Ivory Coast’s, the world’s largest exporter of cocoa halted forward sales for the 2023-24 Ivory Coast mid-crop, which starts April 1, 2024, so the nation’s production forecast can be reviewed.
Ghana, a major cocoa-producing country, has been hit particularly hard. Reduced yields and deforestation have emerged as significant challenges, prompting farmers to incorporate shade trees on their farms as a mitigation strategy.
The stoppage exacerbates the turmoil surrounding the region’s cocoa supply, and if it continues into the upcoming season, the effects may worsen.
Furthermore, there is positive news for cocoa prices due to concerns about reduced cocoa production in Ghana, the world’s second-largest producer.
Ghana’s 2022/23 cocoa crop is now expected to be around 683,000 metric tons, a 13-year low and 24% below initial estimates of 850,000 metric tons, as a lack of fertilizers and black pod disease hurt cocoa yields.
The cash crop needs regular rainfall to thrive combined with sporadic sun exposure, but the heavy and prolonged rains in Ghana have made cocoa crops more fragile.
A tenth of Ghana’s most recent cocoa harvest was lost due to the fungus known as black pod, which rots formed cocoa pods. The rain has also expedited the disease’s growth.
The Fortune Business Insights project that the global market for cocoa and chocolate will reach over $68 billion by 2029, up from a valuation of $48 billion in 2022.
The shadow of climate change is looming large over the cocoa industry. Forestry operations are witnessing an increase in the number of old and sick trees, while the agriculture and public health sectors combat decreased crop yields and a rise in disease spread.