News that El Nino’s strength has diminished and flooding is unlikely to happen in West Africa has brought cocoa prices back to earth. 

The news has also sparked forward buying of cocoa for the 2023-24 season, as international companies rush in to take advantage of rallying supplies. Forward buying is a system where cocoa buyers book a crop beforehand at the reigning price for future delivery.

Ivory Coast, the world’s top cocoa provider, says there is no more window for forward sales of the crop. Farmers in the country shipped 2.32 million metric tonnes in week 1 of August, 2023, down by 2.9% from the previous week. 

Prices of cocoa in the world have been high since 2020 due to shortage. Fear of crop damage by El Nino rains and the spread of flood-related black rot disease had fueled dynamic monthly price rises of cocoa in West Africa. 

Since the La Nina of 2016 sparked a drought in the West African region, leading to record cocoa prices, prices have never dropped till now.

By August 16, 2023, cocoa bean prices had dipped to $2.65 per kg in New York markets, down from $3.35 on July 4, 2023. 

West African cocoa powerhouses Ivory Coast, Ghana, Nigeria, Togo and Cameroon collectively provide 70% of the global supplies. 

In June 2023, Nigeria, the fifth biggest producer of the commodity, announced a yearly drop in cocoa supplies by 8.5%. This trend has already given rise to hard-stance sellers who have been bullish on price.

Nigeria is currently benefiting from rallying chocolate and confection sales, products whose demand had diminished during the Covid-19 period. Dollar purchases of candy products are now up by 10% over a similar timing in August, 2022. 

Confectionery industry in North America hurt by high cocoa prices

Even as West African supply gets on the rebound, high cocoa prices in the past year have hurt the demand of chocolate products in North America. By July 20, 2023, North American cocoa processing in the second quarter had fallen by 12%, the worst in 15 years. This is because US customers stayed off from buying pricey candy.

This comes on the heels of a lawsuit that seeks to block West African cocoa imports into the United States so as to agitate the issue of child labor in cocoa fields. 

All the same, there is high expectation that demand for cocoa and its byproducts will shrink back to normal levels after the good news of the price fall.