Ivory Coast and Ghana, the top cocoa producers, are facing a significant downturn in cocoa processing due to skyrocketing bean prices, impacting nearly 60% of the global supply. This surge in prices has led to a halt or reduction in operations at major cocoa plants, including the state-controlled Ivorian processor Transcao. The cost increase has stemmed from consecutive years of poor harvests and is forcing chocolate manufacturers to raise consumer prices. This situation is exacerbated by the traditional cocoa trade mechanism breaking down, leading to a shift in the market dynamics where local dealers bypass pre-agreed contracts to sell at higher spot market prices.
The consequence of this market shift is a severe strain on the supply chain, with major processors and chocolate manufacturers grappling with bean shortages and inflated costs. In Ghana, plants like the state-owned Cocoa Processing Company (CPC) are operating at significantly reduced capacities. The price hike and operational disruptions are altering the longstanding trade practices, where pre-agreed prices and regulated mechanisms ensured a steady supply chain. Now, processors are unable to fulfill their commitments, causing a ripple effect that leads to increased chocolate prices worldwide.
The global cocoa market is facing a potential crisis with projected production deficits, compounded by bean disease in West Africa, signaling a possible continuation of supply shortages. With the International Cocoa Organisation (ICCO) forecasting a substantial production decline and a market deficit, the chocolate industry may experience further price escalations and reduced availability. This scenario marks a critical period for the cocoa industry, reminiscent of the severe deficits of the late 1960s, posing significant challenges for both producers and consumers in the global cocoa and chocolate market.