The price of cocoa is soaring, and Easter Eggs will be very expensive

This year's Easter egg surprise isn't the sweetest. Chocolate will cost us more, because the price of cocoa has more than doubled in just a few months. This is due to failed harvests and an increase in demand. But it is also the fault of financial speculation made by hedge funds.

The price of cocoa has been rising for months and in February the price of a ton of product reached an all-time high: 5,500 euros. In January 2023, a year ago, it was less than 2500 euros per tonne. There are several factors driving the prices. First of all, the lack of supply compared to demand. Ghanaian exporters say that production, which last year was 655 thousand tonnes, this year will stop at 475 thousand or slightly more. We are therefore talking about 180 thousand tonnes less. The climate is partly to blame: prolonged drought, heavy rains and floods. Events that during the year affected the West African countries (Ivory Coast, Ghana, Cameroon and Nigeria) which alone produce 75% of the world's cocoa. Added to this is the cocoa virus, which is affecting the plantations and which can only be fought by cutting down the plants, which must be replanted with new ones. All this affects a sector where there has been no investment for decades and therefore there are obsolete cultivation and harvesting techniques and trees that are more than twenty years old (the last introduction of new specimens dates back to the beginning of the century). The consequence? Harvests reduced to minimums, scarcity of raw materials to sell for processing and therefore higher prices.

The hedge funds then arrived on the already critical situation, taking a bullish position in recent months, buying futures for more than 8 billion euros, making them rise by 3%. By committing to purchasing cocoa in the future at a higher price than the current one, speculation immediately began to push cocoa prices upwards, until they reached historic highs on the European and American stock exchanges. We are at over 5500 euros per ton. A speculation that is not the direct cause of the rise in cocoa prices, but amplifies it and makes it go beyond the limits.

The surge in the cost of raw materials obviously immediately made itself seen in the prices of chocolate for consumers. In the last year in the United States there have been increases of 11% in the price of bars and sweets. And Easter is coming. The forecast is not sweet. Adding to the rise in the price of cocoa is that of sugar (+72% in 2023 compared to 2022) and cocoa butter (+52% in one year). The increases for Easter eggs seem inevitable, we will just have to wait to understand their extent.