Cocoa Prices Explained

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

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. 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.

2. Weather Conditions

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

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

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

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.

Thus, 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?

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

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.

Planting and Harvesting of Cocoa

Cocoa or cacao is a tropical tree that produces the seeds used to make chocolate. Additionally, it is grown in over 50 countries around the world, but the majority of production comes from West Africa.

The rainy season is the best time to plant cocoa. This typically lasts from June to September. Cocoa trees need moist, well-drained soil, and partial shade.

To plant a cocoa tree, it is required to dig a hole that is twice as wide and deep as the root ball of the tree.

Next, you must fill the hole with a mixture of soil and compost. Then, plant the tree in the center. Additionally, it should be watered thoroughly and mulched with organic matter.

Harvesting

Cocoa trees typically begin to bear fruit after 4-5 years. The fruits or pods are ripe when they turn yellow or orange. Pods are harvested by hand using a machete or other sharp tool.

Once the pods are harvested, the seeds are removed and fermented. Fermentation is a process that breaks down the sugars in the seeds and develops the flavor of the chocolate.

After fermentation, the beans are dried and roasted. The roasted beans are ground into a paste called cocoa liquor. Cocoa liquor is used to make chocolate, cocoa powder, and other cocoa products.

Products Made from Cocoa

1. Chocolate: Chocolate is the most popular product made from cocoa. It is made by combining cocoa liquor, cocoa butter, and sugar. Additionally, chocolate is important in baking.

2. Powder: Cocoa powder is made by grinding roasted cocoa beans into a fine powder. Moreover, it is used in baking, cooking, and making drinks.

3. Butter: Cocoa butter is a solid fat extracted from cocoa beans. It is used in chocolate, cosmetics, and other products.

4. Nibs: Nibs are crushed cocoa beans that have not been roasted or ground. They can be eaten raw, used in baking, or made into chocolate.

5. Tea: Cocoa tea is a hot drink made from cocoa powder and milk. It is a popular drink in many cultures such as Jamaica, Colombia, Peru, and Argentina.

6. Liqueur: Cocoa liqueur is a sweet alcoholic beverage used in cocktails and desserts.

7. Spread: Our favorite chocolate spread like Nutella uses cocoa to intensify its flavor notes.

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. 

What is the future price and season of cocoa? 

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 such as weather conditions and market demand.

Overall, the specific price of cacao per pound in 2030 will depend on a number of factors such as the quality of the cacao, the country where it comes from, and the overall economic conditions in the world.

Here are some rough price estimates for cacao per pound in 2030:

• Fine-flavor cacao: $3.50-$4.50
• Bulk cacao: $2.50-$3.50