Your favourite chocolate - milk or dark - could pinch your pockets a little more as London cocoa prices on InterContinental Exchange have soared to a 46-year-high of £2,678 ($3,406.76) a tonne. Prices of other cocoa products are also likely to increase. But don’t be surprised if its weight decreases.

Cocoa prices have increased by nearly 50 per cent year-on-year on concerns over low supplies from top producers, particularly from Africa, and fears of El Nino posing more risks to the output.

“The rise in global cocoa prices will lead to a rise in chocolate prices, but they will be only marginal,” said Nitin Chordia, India’s first chocolate taster who runs Cocoshala — a training-cum-incubation centre for small chocolate makers.

Manoeuvring manufacturers

“Chocolate prices will likely increase marginally since they contain 50 per cent sugar. Most chocolates contain 30 per cent cocoa and prices might be up to that extent,” said Devabhaktuni Durga Prasad, Managing Director of Hyderabad-based DP Cocoa Products Pvt Ltd.

However, he said, business to consumer chocolate companies “do not normally increase prices whenever input costs go up. They cut the grammage,” he said.

Chordia seconded his view saying the grammage may be cut or the sugar content may be increased. “Manufacturers may even come up with new brands of reduced grammage to manage the situation,” he said. 

Prices of cocoa butter will increase, while food companies which use cocoa may find their expenses increasing, Prasad said. 

However, the softening effect will come from a recent cut in cocoa import duty to 15 per cent from 30 per cent, Chordia said.

2nd year of deficit

Recent projections of the International Cocoa Organization (ICCO)  that the global deficit of the commodity may increase to 1.42 lakh tonnes during the current season (October 2022-September 2023) have triggered the bullish run.

Some in the trade are pegging the deficit to about two lakh tonnes. This is the second consecutive year of global deficit in cocoa. Research agency BMI, a unit of Fitch Solutions, forecast the deficit to narrow to 50,000 tonnes from  2.1 lakh tonnes in 2021-22. The deficit last season was the first since 2015-16. 

BMI said this resulted in a drawdown of global inventories of 11.3 per cent year-on-year. This has resulted in many global manufacturers having low stocks, thus creating pressure on lean supplies. It said cocoa’s bullish sentiment has found support on stronger-than-expected demand in the March quarter this year.

Lower-than-expected arrivals in Ivory Coast, where rains in June have “exacerbated existing concerns related to bean quality” in view of reduced agricultural input use and active El Nino conditions pose further downside risks to cocoa production in the second half of 2023, it said.

Positive twist

The research agency said production in Ghana has not recovered from the crop being affected in 2021-22 by swollen shoot disease. Production may increase to 7.6 lakh tonnes this season from 6.9 lakh tonnes last season, though. 

BMI has raised its cocoa average price forecast for 2023 by $200 a tonne to $2,700. 

“Through May 2023, cocoa prices averaged $2,988 per tonne, equivalent to a 2.5 per cent month-on-month increase, marking the sixth consecutive month in which average cocoa prices have surged, a run that goes back to November 2022 when prices averaged $2,468,” it said.

Chorida said the global price rise has brought about a positive twist too with growers now mulling value-addition. 

Cocoa emerges as a pod from the tree. The pod, which is the size of a football, is split open, and the beans are removed and then fermented, dried and sold.

Big manufacturers buy these beans and go in for alkalisation to ensure consistency in the quality of the chocolate they make. “Growers have now begun to think if they can get a rise value for just producing cocoa, then there could be huge benefits if they value-add. The price rise over the past year has brought in the realisation,” he said. 

GVSR Prasad, a farmer who grows cocoa as an inter-crop with coconut at Tadikalapudi village in Andhra Pradesh’s West Godavari district, said farmers are now being paid  ₹240 a kg against ₹200 at the start of the year.