2024-04-13 10:49:47
Merlyn Casanova, executive director of the National Association of Cocoa Exporters and Industrialists of Ecuador (Anecacao), indicates that the price of a metric ton of cocoa exceeds USD 9,649, reaching a historic figure never seen before, although there was a similar increase in prices. 70s, current levels are incomparable.
Cocoa prices have seen a significant increase since January 2024, and are expected to continue reaching historic levels in the coming weeks. However, this increase has also generated uncertainty in the market.
In a notable development, the price of cocoa has surpassed that of copper for the first time since 2003. For reference, the price of copper was around USD 7,300 per metric ton on March 23, 2024.
The high cocoa prices are attributed to a decline in the harvest in the African countries of Ivory Coast and Ghana, which account for 60% of global production of the grain. Ivory Coast is the world’s leading producer of cocoa, with an annual production of almost seven million tonnes, while Ghana is in third place, with a production of 1.3 million tonnes per year.
In millions of tons. Data from 2022. Source: Primicias/FAO Download the data. Created with Datawrapper
The decline in production in both countries is attributed to disease and climate change, which has sparked speculation in the New York and London cocoa markets. In addition, another factor is expected to influence cocoa prices at the end of 2024.
Recently, the European Commission approved the new Regulation 1115, which prohibits the import of seven raw materials from deforested lands: wood, livestock products, rubber, soy, palm, cocoa and coffee.
These new regulations, designed to effectively combat deforestation globally, also require guarantees that labor and indigenous peoples’ rights are respected.
All countries, including Ecuador, must comply with these regulations by the end of December 2024. However, micro and small businesses have an extended deadline until June 30, 2025. Those that do not comply with these requirements will not be able to continue exporting. to the European bloc.
This could put further upward pressure on cocoa prices, especially if African countries fail to meet the new demands within the established deadlines.
Although high cocoa prices benefit producers, they also raise concerns and doubts in the supply chain. According to Anecacao, Ecuador is the country that pays the highest price in the world directly to the producer, since the price is not regulated.
Ecuadorian cocoa farmers receive 92% of the sale price at the farm exit. “Today, a farmer is obtaining profits of more than USD 380 per quintal of cocoa, while a year ago he only obtained USD 100, which is equivalent to 3.8 times more,” adds Anecacao.
However, the cocoa price boom also has a negative side. The increase in price has impacted Ecuadorian exporters who depend on financial flow for their operation.
“Now, the exporter needs double the investment to access that same ton that just three months ago was worth USD 4,500,” explains Casanova. As a result, international mills have experienced a decrease in cocoa processing levels, going from 2 to 8.5%.
Although the impact on demand has not yet been fully assessed. In addition, chocolate companies have had to increase prices by 30%, but they have also implemented strategies to mitigate the impact on the consumer, such as reducing the size of the bars.
In 2023, Ecuador’s cocoa bean exports amounted to USD 1,171 million, ranking as the country’s fourth non-oil export product in dollar terms, after shrimp, bananas and tuna. However, by 2024, with rising prices, it is projected that Ecuador’s cocoa exports could reach between USD 1.8 and USD 2 billion.
In this way, cocoa could surpass tuna and become the country’s third non-oil export force in dollar terms, after shrimp and bananas. Anecacao points out that Ecuador has been working on sustainability programs with producers and companies for many years, initiatives promoted by the private sector. This has resulted in sustained growth in production per hectare over the last five years.
In fact, the country has experienced 5% annual production growth. “This increase is not due to new plantings, but to low deforestation and the absence of child labor,” highlights Anecacao.