Cocoa prices have been rising steadily in recent months. As of July 1, 2023, the price of cocoa beans has been up 25.02% from one year ago. On June 30, cocoa reached its highest price in 46 years on the International Exchange in London. As a matter of fact, prices have been up a whopping 40% from October 2022, reaching 2,590 British pounds per metric ton, according to Tasting Table.
Cocoa Prices, 2016-2023
Source: cnbc.com
The price of cocoa has fluctuated a lot since 2016. Between 2016 and 2018, cocoa prices dramatically fell from 3,369 per metric ton to 1,809 per metric ton. Between 2018 and late 2022, cocoa prices increased and dropped consistently. The pandemic deeply affected cocoa prices. Indeed, the pandemic has disrupted the production and transportation of cocoa beans. Many cocoa-producing countries have implemented lockdowns and travel restrictions, which have made it difficult for farmers to harvest and transport cocoa beans. In addition, the pandemic has led to labor shortages in cocoa-producing countries, as many workers have been unable to work due to illness or quarantine. In 2022, cocoa prices drop sharply. In 2022, global cocoa production is expected to fall by 2.5% from the previous year. This fall in prices was due to a drought in West Africa, which is the world's largest cocoa-producing region, and the spread of cocoa black pod disease. In 2023, however, cocoa prices have been increasing steadily.
There are three essential reasons that explain the increase in cocoa prices—first, the reduced supply. Indeed, the two largest producers of cocoa beans, Ivory Coast and Ghana, have both experienced lower yields in recent years due to weather conditions and disease. This has led to a global cocoa bean deficit, which is driving up prices. Second, the increased demand. Demand for cocoa beans is growing, particularly in emerging markets such as China and India. This is being driven by rising incomes and a growing taste for chocolate. And third, the rising energy costs. The cost of energy, which is used in the production of chocolate, has also been rising. This is adding to the cost of producing chocolate, which is being passed on to consumers in the form of higher prices.
The increase in cocoa prices tremendously helps Ivory Coast and Ghana exports. It will primarily increase revenue. When cocoa prices are high, Ivory Coast and Ghana earn more money from exporting cocoa beans. This increased revenue can be used to f invest in infrastructure, or improve the lives of cocoa farmers. In 2022, Ivory Coast and Ghana exported a combined 4.04 million tons of cocoa beans, generating $6.8 billion in revenue. This represents a 15% increase in revenue from the previous year. The high cocoa prices are a major factor in this increase in revenue.
High cocoa prices lead to improved terms of trade for Ghana and Ivory Coast. Indeed, When cocoa prices are high, Ivory Coast and Ghana have more bargaining power with chocolate companies. This means that Ivory Coast and Ghana can demand a higher price for their cocoa beans, which can lead to even more revenue for the countries. The terms of trade for Ivory Coast and Ghana's cocoa exports have improved in recent years. This means that Ivory Coast and Ghana are getting more money for their cocoa beans relative to the cost of their imports. This is due to a number of factors, including high cocoa prices and a weaker US dollar.
It is important to emphasize that high cocoa prices can create more jobs in the cocoa sector in Ivory Coast and Ghana. This is because more cocoa beans need to be harvested, transported, and processed when prices are high. As a matter of fact, high cocoa prices have created more jobs in the cocoa sector in Ivory Coast and Ghana. In 2022, the cocoa sector employed an estimated 5 million people in Ivory Coast and Ghana. This represents 15% of the countries' total workforce.
Overall, high cocoa prices can have a number of positive impacts on Ivory Coast and Ghana exports. They can help to boost economic growth, and improve the lives of cocoa farmers.