Is chocolate going to increase in price?, Sugar is also at a high level, soaring! Cocoa futures repeatedly hit new highs in chocolate | Cocoa | Futures
In daily life, chocolate is a favorite snack for many people. But as the prices of raw materials such as cocoa rise, the chocolate you often eat may have to rise in price.
Soaring up! Cocoa futures repeatedly hit new highs
Recently, the soaring cocoa futures have attracted market attention. According to previous reports from Reuters, the price of cocoa, the raw material for chocolate, rose to a over 12 year high in the New York market on July 18th, while a few weeks ago, cocoa prices in the London market had just risen to a 46 year high.
A reporter from China News Finance and Economics found on the Intercontinental Exchange that the London cocoa futures have been rising since the end of last year, reaching a new high of £ 2703 per ton on August 1st, and have been hovering at high levels recently.
London Cocoa Futures Trend Chart
Why is cocoa futures rising rapidly? In the June Cocoa Market Report released by the International Cocoa Organization, it was mentioned that in the context of continuous supply shortages in the global cocoa market for many years, floods may have potential harmful effects on the growth of cocoa in Cote d'Ivoire, causing serious tension and contributing to the rise in cocoa futures prices.
According to the Abidjan Portal website, Cote d'Ivoire is the world's largest cocoa producing country, accounting for 45% of the world's cocoa production and 40% of its total exports. However, due to sustained heavy rainfall, Yves Brahima Kone, Chairman of the Cote d'Ivoire Cocoa and Coffee Committee, announced that Cote d'Ivoire has decided to suspend cocoa exports for the years 2023-2024.
Not only Cote d'Ivoire, but also neighboring countries such as Ghana are heavily affected by rainfall in terms of cocoa production. Under the influence of weather and other factors, Bloomberg reported that Ivory Coast's cocoa production is expected to decrease by 20% year-on-year this year, and Ghana, the second largest cocoa producing country, is expected to have cocoa production lower than the historical average.
Sugar futures prices are also at a high level
Not only cocoa, but also sugar, another major ingredient required for making chocolate, has been consistently high in futures prices since the beginning of this year.
Due to increased demand and unfavorable weather expectations, according to Reuters, ICE raw sugar futures climbed to an 11 year high in April this year.
Although sugar prices have declined recently, as of August 11th, the main futures price of Sugar 11 still closed at 24.38 cents per pound.
Sugar 11 main futures price trend chart.
In response, the Food and Agriculture Organization of the United Nations stated that sustained concerns about the potential impact of El Ni ñ o on sugarcane crops and the combined impact of rising international crude oil prices have suppressed the decline in world sugar prices.
However, some dairy products used in milk chocolate have seen their prices decrease. Data shows that the Food and Agriculture Organization's dairy price index fell 0.4% month on month in July, a decrease of 20.6% compared to the same period last year.
Swiss lotus and Hershey release price increase signals
According to data from the consumer intelligence database NielsenIQ, chocolate prices increased by 14% in 2022. Faced with the soaring prices of cocoa and sugar futures, the market also believes that chocolate prices may further rise.
Sergei Chetvitakov, Chief Research Analyst at Standard&Poor's Global Commodity Insight, told CNBC, "I believe consumers should be prepared for the possibility of rising chocolate prices. As chocolate producers continue to be squeezed by rising raw material costs, soaring energy costs, and rising interest rates, they have to pass on higher production costs to consumers."
According to Bloomberg, executives from Swiss companies Lotus and Hershey have recently warned that the possibility of further price increases cannot be ruled out, even if consumers have to bear higher costs for their products.
"For most companies, the impact of a significant increase in cocoa prices in the future will not be apparent until the second half of 2023," said Martin Hooge, Chief Financial Officer of Swiss Lotus, to analysts during a earnings conference call. "Companies that feel additional cost pressure may therefore feel the need to adjust pricing.".
