By Mike Foley
Chocolate lovers already feeling the sting of high prices should brace for worse: costs will continue to rise as global cocoa supplies are at their lowest level in two decades.
But spare a thought for cocoa farmers in west Africa, battling poor weather, crippling crop diseases as well as local and international governments – all while missing out on their fair share of the price hike.
Chocolate prices are set to rise sharply. Credit: Edwina Pickles
Economy-wide price pressures from the rising costs of labour, packaging and energy have been driving up the cost of chocolate for the past couple of years.
The cocoa crunch means lovers of dark chocolate will be the hardest hit, but there’s a silver lining for fans of the milk variety, who will avoid the worst of the price hikes because their favourite products contain less of the expensive cocoa.
Consumer Price Index data showed year-on-year inflation is 4.6 per cent in snacks and confectionery. This follows a similar price increase that hit in the June quarter of 2023 and Rabobank said the cumulative price rise was 22 per cent from June 2022 and June 2024.
But Rabobank commodity analyst Paul Joules said a chronic global shortage of cocoa supplies, the key ingredient in chocolate, means the “the worst is still yet to come for consumers”.
Manufacturers have been making chocolate from stockpiles of cocoa bought up to 18 months ago, and they will get their first taste of the unprecedented high prices now, which they will inevitably share with shoppers.
“While hedging has protected many manufacturers from the worst effects of the price rises until now, eventually all these forward contracts will get used up, and prices will have to increase to reflect the current cocoa price,” said Rabobank’s Soaring chocolate prices report, released last week.
All chocolate varieties will feel the pinch in one way or another, with market analyst Rabobank warning that companies will shrink the size and cocoa content of products to maximise their profits.
Rabobank said cocoa prices rocketed upwards earlier this year, when cocoa that had been selling for around $3000 a tonne for the past few years shot up to $12,000 a tonne.
While prices have eased back to $8000 a tonne, many chocolate manufacturers are about to use the last of the cocoa they bought years ahead under hedge contracts to buffer against future price spikes.
Joules analysed how cocoa prices may flow through to chocolate prices overseas, and found that a 100 gram block of chocolate with 70 per cent cocoa content could rise from $4.90 to $6.50.
“A similar increase could be expected in Australia,” Joules said.
People are struggling on the other side of chocolate’s global supply chain, where small family farmers in West African nations of Ghana and Cote d’Ivoire grow about 70 per cent of the world’s cocoa crop.
They have been buffeted by poor weather, crippling crop diseases, and now they are grappling with the need to prove they can comply with a new law in one of their biggest markets, the European Union, that will ban products that cannot prove they are grown without deforestation by the end of the year.
“We’re seeing that the trees are generally ageing due to poor husbandry we’re seeing a lot of disease, which has effectively wiped out a lot of the crop,” Joules said.
A cocoa tree is productive for about 20 years, and many are reaching the end of their production cycle, but with new plantings taking up to four years to start producing, Joules said many farmers are left in a bind.
What’s more, West African farmers are not getting a fair share of the profits from soaring cocoa prices because their governments are gobbling up profits by setting farm gate prices, before they sell it on with a mark-up.
“Farmers aren’t receiving the full commodity price due to government intervention,” said Joules, who explained that governments set a uniform farm gate price for all growers in the country and sell the crop nationally, with the mark-up flowing into national coffers.
“All farms there are small-scale and a lot of the farmers are on the poverty line.”
How will chocolate lovers respond to soaring prices and shrinking products?
Rabobank said they might mirror the consumption patterns for olive oil in Spain.
Repeated small harvests have driven up olive oil prices and the Spanish, traditionally one of the heaviest consumers of olive oil, have switched to cheaper products.
Olive oil retail prices in Spain rose 61 per cent in the 12 months to May 2024 and sales fell 18 per cent, Rabobank said, noting that the sales of a cheaper alternative, sunflower oil, rose 25 per cent in the same period.
Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.