Harvesting Robusta coffee in Central Java, Indonesia.
Price spikes are a threat to coffee and chocolate manufacturers globally. Some chocolate and coffee makers say they will have to pass on the increased costs to consumers.
Cocoa prices reached historic peaks
Cocoa prices have more than tripled over the same period last year due to concerns about the supply crisis and have increased 49% in March 2024 alone, up to 10,050 USD a ton.
Starting to increase in mid-2022, cocoa prices have accelerated this year, continuously setting new historical highs due to supply shortages.
Session 4/11, cocoa July futures on the London exchange reached 8,354 GBP/ton, while in New York reached 10,156 USD/ton, as dealers continued to worry about poor crop conditions in Ivory Coast and Ghana in the 2023/24 crop year. Present. Ghana is currently negotiating with traders to postpone deliveries of at least 150,000 to 250,000 tons of cocoa until next season.
Cocoa prices in New York increased dramatically.
Coffee prices are highest since 2008
Meanwhile, severe drought in Southeast Asia, especially in Vietnam and Indonesia, is leading to reduced coffee harvests, affecting the output of two of the major producers and exporters. The world’s leading coffee.
“There’s almost no rain. If there continues to be a lack of water for irrigation, coffee output in the 2024/25 crop year may decrease sharply compared to the current crop year,” Reuters cited information from the Vietnam Trade Exchange and City Commodity Trading Joint Stock Company. Ho Chi Minh said in an announcement this week.
The world coffee reference price – the future price of Robusta coffee in London – has now increased 15% compared to last month, continuing to increase from the beginning of April until now, currently reaching 3,851 USD/ton, the highest since the contract began trading in 2008. Arabica coffee prices are similar, increasing by 17% in March 2024 to 2.16 USD/lb, continuing to increase until April 11, reaching 2.1890 USD/lb, highest in 18 months.
Coffee stocks have recovered somewhat in recent weeks but remain at recent historical lows. Charles Hart, senior commodity analyst at BMI, said the export outlook for Robusta coffee is expected to decline sharply, while Arabica coffee is expected to return to a surplus this year but only in surplus. little.
Robusta coffee price.
Weather reduces
Growing cocoa and coffee requires very specific temperature, water and soil conditions. Now, more frequent heat waves, heavy rainfall and severe drought are damaging crops and crippling supplies amid growing demand from customers around the world.
In West Africa, which produces about 70% of global cocoa, cocoa powerhouses Ivory Coast and Ghana are facing disastrous harvests this season due to El Niño, a sea-surface temperature phenomenon. above average – leading to unseasonably heavy rains, followed by intense heat waves.
According to reports from these two countries, the extreme heat has weakened cocoa trees, which were already damaged by heavy rainfall late last year. At the same time, rain also worsened road conditions, disrupting the transport of cocoa beans to export ports.
The International Cocoa Organization – a global body comprised of member countries that produce and consume cocoa – said in its new monthly report that it expects the global cocoa supply deficit to widen. 374,000 tons in the 2023-2024 crop year, from 74,000 tons in the previous crop year. Global cocoa supplies are forecast to fall nearly 11% to 4.449 million tonnes compared to 2022-23.
“Production is expected to decline significantly from the world’s leading producing countries as they are already feeling the adverse impact of unfavorable weather conditions and pests,” the organization said.
Cocoa beans are dried on a farm in Kwabeng, Ghana.
Output prospects are uncertain
At the heart of the matter, climate change will play a key role, according to market observers, as the impact of extreme weather events could exacerbate pressure on cocoa supplies. and coffee.
While the impacts of climate change are severe, other serious structural issues are also affecting cocoa production in West Africa in the short to medium term. According to BMI, illegal mining poses a significant threat to cocoa farms in Ghana, destroying arable land and poisoning water supplies, and the problem is becoming increasingly serious in Ivory Coast. .
The problems are being exacerbated by deforestation – because some people want to increase cocoa production. Since 1950, Ivory Coast has lost about 90% of its forest area, while Ghana lost about 65% during the same period. That has pushed farmers into areas less suitable for growing cocoa such as grasslands, increasing the amount of labor needed and bringing more risk to the harvest.
Analysts fear the record rally in cocoa and coffee prices may be more than just a fad, as adverse weather conditions and strong demand trends could support prices in the coming months.
Citi Bank predicts Arabica coffee futures prices will fluctuate between 1.88-2.15 USD/lb this year, but said it may adjust its forecast if the supply outlook in 2024- 25 tighten further.
Reference: WSJ
