Assessing impact of El Niño on cocoa supply, prices

The cocoa market is experiencing a sustained surge in prices, hitting record highs this week. Analysts attribute this surge to the impact of El Nino on cocoa production. Tedd George, Chief Narrative Officer at Kleos Advisory, shed light on the production and pricing dynamics at play in a recent interview. According to George, cocoa prices have exceeded 5,000 pounds per ton sterling, the highest levels since the 1970s crisis. Factors such as the swollen shoot disease in Ghana and the significant loss of farmland have contributed to the current crisis. Ghana, which has faced two consecutive poor seasons and is now in a third, is struggling with production issues. Meanwhile, Cote d'Ivoire, the largest cocoa producer, is also facing a potential 25% decline in production. Climate change, exacerbated by El Nino, is a significant factor driving these challenges, along with sustainability issues and aging trees. Efforts are being made to address the situation, including a World Bank loan to Ghana to combat the swollen shoot virus. However, the recovery of affected farmlands is expected to take up to five years. George emphasized that replanting and restoring production levels will require several years, further prolonging the crisis. As a result, the immediate future of cocoa production in these countries remains uncertain. The implications of this crisis extend beyond the cocoa producers to off takers, including trading houses and chocolate manufacturers. With the high prices of cocoa likely to persist, industry players may need to adjust their products and pricing strategies. George suggested that we could see a reduction in the use of cocoa in products, potentially leading to smaller portion sizes or the use of substitutes. The traditional chocolate bar that consumers are familiar with may become a luxury item as prices soar. In conclusion, the cocoa market is facing a severe crisis due to production challenges caused by factors like climate change and disease. The sustained surge in prices reflects the gravity of the situation, with long-term implications for both producers and consumers. As the industry grapples with these challenges, stakeholders will need to adapt to a new reality in the cocoa market.