Cocoa prices have soared since the beginning of the week, 7% in London at £1,715 a tonne, and 10% in New York to more than $2,500 per tonne, hit a 10-month high on Wednesday on uncertainty about supplies from the Ivory Coast, the world’s largest cocoa exporter used to produce chocolate.
Cocoa prices are certainly far away from March 2011 record levels but reached their highest since last november.
This surge was unexpected especially since the International Cocoa Organization (ICCO) cut the global supply deficit forecasts for the current season from 43,000 to 19,000 tonnes due to lower than expected consumption estimates. It is however due to two reasons: one weather-related and the second one policy-related.
The first one is due to the cocoa “black pod” disease, which is caused by a fungus (Phytophthora) that spreads rapidly on the pods under conditions of excessive rain and humidity, insufficient sunshine, and temperatures below 21°C. These are the weather conditions currently prevailing in the Ivory Coast and Ghana which could seriously affect the volume and quality of the next harvest even if it is obviously too early to draw conclusions.
The second one is due to a policy change by the Ivory Coast regulator early 2012 which sold the bulk of its 2012-13 crop when the market fluctuated between £1,450 and £1,550 a tonne. But since then, prices have risen because of weather concerns and sporadic civil unrest in the Ivory Coast, so there are concerns of a potential squeeze, especially with regards to how farmers will respond to the new fixed price regime and weather they actually deliver on their forward sold cocoa contracts.