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As Cocoa Prices Rise Steadily, Consumers Concerned on ‘How Much Higher?’

Consumers may begin to witness the effects of rising cocoa prices as the globe faces its greatest supply gap in decades, with growers in West Africa battling with harsh weather, disease, and failing trees.

Cocoa futures for May delivery reached an all-time high of $10,080 per metric ton on Tuesday, but then fell 0.3% to $9,622. Cocoa prices have more than tripled in the last year, with a 129% increase expected in 2024.

Hershey CEO Michele Buck told CNBC last month that the company has a hedging approach to minimize pricing volatility. The National Confectioners Association told CNBC via email that the sector is collaborating with retailers to “manage down costs” and keep chocolate cheap for customers.

Though the large chocolate firms were well-hedged last year and did not have to instantly pass on high prices to customers, Paul Joules, a commodities analyst at Rabobank, believes the industry can only tolerate so much expense.
According to Joules, the world is facing the worst cocoa supply gap in more than 60 years, and consumers may begin to notice the effects by the end of this year or early in 2025. The International Cocoa Organization predicts a supply shortage of 374,000 tons for the 2023-24 season, up 405% from 74,000 tons the previous season.

“The worst is still yet to come,” Joules said. Cocoa prices will likely remain elevated for some time because there are no easy fixes to the systemic issues facing the market, he said.

Consumers may face higher pricing or “shrinkflation” in the shape of smaller chocolate bars, Joules stated. Companies may also modify ingredients to use less cocoa in some goods, he said. The researcher predicted that dark chocolate, with its high cocoa content, will cause the most sticker shock.

According to David Branch, sector manager at Wells Fargo’s Agri-Food Institute, consumers may experience higher costs as early as Easter, which falls on Sunday.

“Given that cocoa prices and other manufacturing costs have been steadily rising over the past year, it is likely that consumers will see a price spike on chocolate candy this Easter,” Branch said in a research note to clients this month.

Cocoa prices have risen sharply as a result of supply interruptions in key producing countries Ivory Coast and Ghana, according to Joules. The two countries account for around 60% of worldwide cocoa production.

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