Cocoa prices decline 19% in highest single-day drop since 1980 

USA- International cocoa prices dropped by US$1,700 per ton to US$7,175, the highest one-day price decline since 1980. 

Despite this recent price drop, cocoa prices remain comparatively high. 

Cocoa prices have averaged US$2,500 per ton in the past decade, which suggests the market is still experiencing significant price disruption.  

The price decline means cocoa is up nearly 70% year-to-date and 137% over the past year. 

Earlier this year, cocoa futures traded at US$11,722, a record high in mid-April. 

Since mid-April, prices have swung wildly, dropping by 30% in two weeks before rising to US$8,700 in early May. 

These high prices were caused by a cocoa bean shortage caused by disease, extreme weather, and supply chain disruptions. 

The cacao Swollen Shoot Virus Disease (CSSVD) caused major disruptions in the supply chain, slashing harvests by between 15% and 50% in major oil-producing regions in Ghana and Ivory Coast. 

The cocoa market experienced significant price speculations, which also contributed to the price.   

Players in the cocoa industry are expected to reconsider some of their strategies for managing high volatility and avoiding passing cocoa prices on to customers.  

Major chocolate companies opted to hedge commodities to avoid passing on such prices to customers.  

Companies that use more pure cocoa instead of fillers like palm oil were worst hit by the price increase, with some deciding to raise the crop prices.  

The drop comes after cocoa-producing regions experienced delayed rainfall and harvests improved. 

However, it is still being determined when these price corrections will be translated to chocolate commodity prices. 

This is primarily because of the shortfalls in demand in the cocoa market, which is expected to continue well into September. 

The International Cocoa Organization forecasts a 374,000-ton cocoa shortage in the current season ending September, when harvests improve. This shortage is expected to contribute to prices. 

The current price drop is not a quick fix to the cocoa market; it is a collaboration between various stakeholders. 

Researchers are still developing solutions for CSSVD to improve yields and meet demand. 

Major chocolate companies like Mondelez are expressing optimism about further price corrections in the future.  

Mondelez’s CFO, Luca Zaramella, said the market was overreacting to stimuli and would correct itself by the end of the year. 

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