Cocoa crops are shrinking, and that is leading to a rise in cocoa prices. The shortage of cocoa trees is due largely to the dry days and delayed application of fungicides and pesticides to protect the crops. As a result, there are about a third fewer crops than usual. The possibility now exists that cocoa farms in Ghana may not be able to deliver on all of its orders.
On a more positive note, many insiders expect Ghana’s cocoa crops to revitalize in the next season. The farms there will receive help from that national government in the form of seedlings and pesticides they will give to farmers. Those actions will go against some of the reductions the government had made on its cocoa-subsidy program.
The current issues illustrate a big issue in the cocoa futures markets that are valued at $6.5 billion. The issue is the reliance on Ghana and the Ivory Coast for more than half of the world’s cocoa provisions. Cocoa prices skyrocketed to the highest in three-and-a-half years in 2014 when Ebola took over West Africa; when Ebola didn’t spread to the Ivory Coast or Ghana, the prices gradually dropped by just over 20 percent.
As for the current rise in cocoa prices, it is due to processors searching for the limited amount of crops. For example, some companies have the word ‘Ghana’ on their coffee packages, and it cannot be changed to say ‘Ivory Coast.’ The decline in production is affecting people throughout the industry, from Ghana-based processors to companies around the world who await their orders in peril.
Although Ghana’s output is lower than before, the demand for its cocoa is still high. The ICCO predicts that consumption will outweigh production by about 38,000 tons of cocoa beans. The ICCO revised that number recently from a previous estimate of 17,000 tons.
Cocoa prices are likely to increase, as per Matt Forester, chief investment officer at New Square Capital in Pennsylvania. As global demand continues to rise, price increases will be spurred on by issues with supply distribution.