Happy Valentine’s Day – Cocoa Glut Causes Price Decline

13 Feb 2016 --- As the most romantic day of the year approaches, chocolate sales are surging around the world more the usual as the cost of cocoa has fallen to an eight-year low. As cocoa growers across West Africa and Latin America collect higher than average harvests, production levels are increasing, leading to a boom year for cocoa supplies. As this accounts for around 70% of the world’s cocoa production, global prices are being pushed down - the lowest since 2008.

Cocoa has fallen 31% in the past year on ICE Futures U.S. in New York, at US$1,951 a metric ton last week. Prices settled at $1,962 on Friday.

Cocoa is the commodity with the biggest losses in the last 12 months and the International Cocoa Organization (ICCO) confirms the price decline was prompted following production surges in the world’s largest growing regions. 

The surplus is expected to continue throughout the season and predictions of favorable weather conditions, particularly in West Africa, are likely to lead to future bumper crops. 

The low cost of cocoa will incentivize demand for chocolate beyond Valentine’s Day (Feb. 14) tomorrow and could lead to new promotions from U.S. and European confectionery giants which are reportedly buying new forward contracts at lower prices – and so the reductions for chocolate consumers could get more pronounced throughout the year. 

The production surge and falling prices is good news for makers of Cadbury’s chocolate and Oreo cookies, Mondelez International, as well as the world’s leading cocoa processor, Barry Callebaut.

Recently people in general have been eating less chocolate as the trend for healthier alternatives continues to push demand for free-from products and so on which has led to an overall decline in chocolate sales. However, Valentine’s Day is a different story and sales are booming more than usual. 

According to the U.S. National Retail Federation, Americans are expected to spend US$1.7 billion on candy by tomorrow, by far the biggest day of the year for chocolate sales.

by Gaynor Selby