Cocoa Prices Explained

As you can see cocoa prices are fluctuating. But why is that? And is there a way to predict the price of cocoa?

Why are cocoa prices fluctuating?

The price of cocoa variation is largely dependent on a lot of factors but several recurring reasons make it to the top. Here are some:

1. Weather Conditions

The impact of climate change brings severe weather conditions to cocoa-producing countries.

Ghana, one of the top cocoa-producing countries experiences 4 points reduction from its constant 900 thousand metric tons of cocoa beans production because of a severe drought for the last two years.

This proves that unfavorable weather condition is the ultimate contributor to cocoa’s production and market price movement.

2. Supply and Demand

The imbalance condition between cocoa’s supply and demand highlights its volatility in the market. 

The constant demand for cocoa-processed products like chocolates, cocoa powder, and distilled beverages is hard to meet for farmers who are already experiencing production problems.

Thus, continuous price hikes are present for both confectionaries and consumers.

3. Production Costs

The costs of labor and fertilizer also play a major part in cocoa price fluctuation. Any increase in these will prompt producers to sell at current prices.

This drives the cocoa price up in the market.

4. Buying Trends 

Changing consumer preferences and consumption can impact the demand for cocoa.

For example, the increasing interest in dark chocolate and organic cocoa powder because of fad diets can lead to higher cocoa demand and market price.

Similarly, the rising price of dark chocolates will lead consumers to buy cheaper alternatives to fill in the gap.

Overall, the shifting demand and purchasing capability are closely related to the cocoa price movement.

Which variables impact the price of cocoa?

• Weather Conditions
• Political Instability
• Supply and Demand
• Currency Exchange Rates
• Consumer Trends
• Production Cost

Where does cocoa come from?

The Mayans and Aztecs first cultivated cocoa trees as a crop in the tropical regions of South America. Originally, the Aztecs used cocoa beans as currency.

Today, Côte d’Ivoire, Ghana, and Indonesia are the largest cocoa-producing countries in the world occupying over two-thirds of cocoa production. Nigeria, Cameroon, Brazil, Ecuador, and the Dominican Republic followed distantly. 

In the US, Hawaii is the only state that produces cocoa minimally. 

When is the cocoa season?

Generally, the cocoa season is reliant on the country’s geographic location and climate. The cocoa trees bear fruit throughout the year and are typically harvested twice each year.

In West Africa, the main cocoa season is from October to March with a minimal harvest from  May to August.

In Indonesia, the main cocoa harvesting season is from September to December with a mid-crop harvest from March to July.

To summarize, the alternating cocoa season shows steady production every year, however, the timing and size of its harvest are subject to several variables like weather conditions and market demand.