Not so sweet: climate change has cocoa in crisis
In recent years, inflation has surged in many economies, impeding economic growth and affecting consumer choices. This inflationary trend especially affects the food and consumer sector, leading to food insecurity locally and globally.
Meanwhile, the cocoa industry faces unprecedented challenges, particularly with soaring cocoa prices and supply shortages. These developments have profound implications not only for chocolate manufacturers but also for millions of farmers whose livelihoods depend on the commodity.
The situation is exacerbated in Ivory Coast and Ghana, the leading cocoa producers, where excessive rainfall has hampered output and delayed harvests.
This shortfall has propelled wholesale cocoa prices in New York to their highest levels in 46 years. According to Maxar Technologies, total precipitation in West Africa has exceeded the 30-year average, compounding the damage to cocoa yields.
Ghana anticipates its lowest output in 13 years, while Ivory Coast expects its smallest in seven years. Together, these countries account for about 60% of global cocoa production.
The surge in cocoa prices has led to fluctuations in the shares of major chocolate companies such as Nestlé and Mondelez hitting their earnings growth projections. Experts attribute the price surge to various factors, including adverse weather conditions affecting cocoa crops in West Africa; in particular, strong Harmattan winds are damaging cocoa trees.
These market dynamics are reflected in the futures market, where benchmark London and New York cocoa futures have hit record highs. Industry stakeholders, including exporters and pod counters in cocoa-producing regions such as Ghana, are concerned about the significant drop in output for this season compared with previous years.
Addressing the cocoa crisis and ensuring a sustainable future for farming communities requires more than just changing farming and production methods. It also involves reshaping consumer preferences towards more sustainable options. Studies indicate that about 65% of consumers are inclined towards making choices that contribute to a more sustainable lifestyle.
To meet this demand, food producers, suppliers and retailers must make sustainable options easy, affordable, and attractive. That involves overcoming barriers such as price and availability and ensuring that sustainable options are as tasty and appealing as less sustainable alternatives.
Innovation, reformulation, and the use of quality ingredients are essential in achieving this balance.
A recent Reuters cocoa survey forecast a global deficit in the cocoa market for a third straight season in 2023/24. That’s expected to worsen the challenges faced by chocolate manufacturers and consumers alike, raising questions about the sustainability of cocoa production and the potential implications for future supply and prices.
In addition to cocoa, other soft commodities such as sugar and coffee have also experienced price fluctuations, reflecting broader trends in the agricultural commodities market. These developments underscore the interconnected nature of global commodity markets and the challenges faced by producers, traders, and consumers.
Despite these challenges, the Nestlé income accelerator programme is a promising step in addressing the underlying issues in cocoa farming and fostering sustainable practices. Aligned with the findings and recommendations of the recent World Economic Forum report, the programme aims to improve sustainable cocoa production while further improving the lives of farmers and their families.
However, as the cocoa industry grapples with supply shortages and price volatility, broader collaboration and innovative solutions will be needed to ensure a stable and sustainable future for cocoa-farming communities worldwide. Such collaboration will enable us to drive positive change for consumers, cocoa farmers, communities and the planet.
The climate crisis is having a profound effect on the continent, with many communities facing huge challenges related to food security. Rising temperatures, changing rainfall patterns and increased frequency of extreme weather events are contributing to decreased crop yields and increased food prices.
Dealing with these challenges requires a co-ordinated and sustained effort involving governments, non-governmental organisations, the private sector, and local communities. By investing in sustainable agriculture practices, modernising agricultural infrastructure, and promoting public-private partnerships, we can ensure food security and sustainable growth in Sub-Saharan Africa and beyond.
The private sector plays a critical role in addressing these challenges. Companies can support sustainable agricultural practices by investing in research & development, developing sustainable supply chains, and supporting local farmers.
By leveraging the strengths of each sector and working together, we can build a more resilient and sustainable future for cocoa-farming communities and tackle the broader challenges posed by climate change in Africa and beyond.
Ghana expects the smallest cocoa crop in 13 years; Ivory Coast sees a seven-year low. They account for about 60% of global output