Soaring Cocoa Prices Threaten Chocolate Affordability, Outpacing Bitcoin’s Rise

Chocolate lovers, beware- the price of your favorite sweet treat is on the rise, possibly driven by a shortage of cocoa beans and fueled by investment activity. This surge has even outpaced the gains of Bitcoin, the once-volatile cryptocurrency, in the past year.

While Bitcoin has been a strong performer, cocoa is the real moneymaker for investors this year. Cocoa prices have skyrocketed, doubling since the beginning of 2024 and tripling over the past year. Analysts predict even steeper climbs ahead, with Rabobank’s Paul Joules warning that the worst is yet to come. This dramatic rise is driven by a historic cocoa shortage, the largest in over 60 years, according to the International Cocoa Organization. The projected deficit is 405% higher than last season.

Cocoa Prices Skyrocket, Outpacing Bitcoin

The price of cocoa has dramatically increased in 2024, nearly doubling since the beginning of the year and tripling over the past 12 months. This surge surpasses even Bitcoin’s impressive gains, which saw a record-breaking 150% climb in the same period. Analysts predict a potential cocoa shortage looming. The International Cocoa Organization forecasts a significant deficit in cocoa supply, with a projected 405% increase compared to the previous season.

West Africa’s Weather Woes Impact Supply

West Africa, which produces roughly two-thirds of the world’s cocoa, is presently facing extreme weather conditions. This has severely affected cocoa crop yields and transportation to international markets. Unlike other commodities, ramping up cocoa production quickly can be quite challenging. Aging trees in West Africa are producing less, and farmers struggle to control diseases affecting their crops.

Hedge Funds See Opportunity While Consumers Feel the Pinch

On the one hand, hedge funds are capitalizing on the situation, with over $8.7 billion invested in cocoa futures, essentially betting on continued price increases. However, this activity has further driven up cocoa prices. Experts suggest hedge funds might have the biggest risk exposure to cocoa ever.

The rapid price increase has had a negative impact on chocolate companies like Hershey’s, whose stock price has fallen significantly in the past year. Analysts are downgrading the company due to rising cocoa costs impacting their profit margins.

Chocolate- From Affordable Treat to Luxury Good?

On the other hand, for consumers already struggling with high inflation, soaring cocoa prices threaten to turn chocolate bars into luxury goods. Hershey’s and Cadbury’s have both hinted at potential price increases. With cocoa prices reaching unthinkable levels, some might even consider chocolate a tax write-off this year. Another likely outcome is shrinkflation, a phenomenon in which companies maintain prices by reducing product size or using less cocoa in their products.

Future Outlook- A Chocolatey Conundrum

Cocoa prices have been steadily rising for some time, but the dramatic increase in 2024 is unprecedented. This shortage, driven by weather and investment activity, poses a challenge for chocolate companies and consumers alike. Whether consumers will face higher prices, smaller portion sizes, or a combination of both remains to be seen. That said, one thing is certain—unlike Bitcoin’s volatile swings, chocolate’s affordability seems to be on a one-way trip upwards.

https://finance.yahoo.com/news/cocoas-rise-outpaces-bitcoin-hedge-184214864.html

https://www.businessinsider.com/easter-chocolate-expensive-price-of-cocoa-bitcoin-2024-3