Cocoa prices are going cuckoo

Warning: the Easter Bunny might be dropping off fewer chocolate eggs than usual this year. 

Driving the news: Over the past year, cocoa futures have surged 250% as suppliers grapple with a historic shortage. After breaking a record high last month, prices have passed US$10,000 per metric tonne, a number that would have been unthinkable just weeks ago. 

Catch-up: The root causes of this shortage go way back. Systemically low cocoa prices and repressive labour practices kept growers in poverty and led to little re-investment in farms, and cocoa never levelled up to a more sustainable plantation model like other cash crops. 

  • In fact, the last time new cocoa trees were planted in West Africa was in the early 2000s. The cocoa trees responsible for 75% of the world’s chocolate production are too old, leading to smaller yields and a higher risk of disease.

Now, West African nations — in particular the world’s two biggest producers, Ivory Coast and Ghana — have seen their cocoa crops decimated due to invasive fungal diseases

  • This year, the shortage has been exacerbated due to unseasonably warm and wet weather brought by El Niño, resulting in scarcity during typical peak harvest times.  

Why it matters: It’s not just that chocolate will get pricier; there literally won’t be enough to fill the shelves. With the industry running on basically no inventory, big brands will start pushing more non-chocolate sweets and engage in even more egregious shrinkflation.

  • Brands could also start cutting products with more fillers and additives instead of cocoa butter, like palm oil, vegetable oils, and synthetic chocolate flavourings.

Bottom line: Cocoa prices can only go up for so long, but they’re not coming down anytime soon, either. So, if you have a sweet tooth, maybe trade the KitKats for Krispy Kremes.—QH