Dry weather in West Africa has lifted cocoa futures, with supply concerns boosting a commodity that saw prices fall in 2021.
November to March is the dry season in the Ivory Coast, by far the world’s largest exporter of cocoa beans. But it has been particularly dry in recent weeks, according to analysts and traders, which has investors betting on a diminished crop and sustained price rises ahead.
Most-actively traded cocoa futures have risen about 12% this year—and 11% in February alone—to $2,811 a metric ton, on pace for the highest monthly level since April 2018. That has added to the challenges facing chocolate makers and sellers, which have complained about rising labor and other costs.
Analysts warn that a continued lack of rainfall could hurt the crop that is set to be harvested in April, requiring more beans to make the same product. Some local buyers have been reluctant to pay previously agreed prices for cocoa beans, citing diminished quality, Commerzbank analysts said in a Tuesday note.
“You see cocoa futures going up and your chocolate bar is going to be more expensive,” said Peter Mooses, a trader at RJO Futures.
Cocoa beans, which finished 2021 down 3.2% as supply levels remained steady, are one of several commodities to see prices climb recently. Sugar, another key ingredient in chocolate, is near four-year highs, while soybeans are edging back toward highs registered last year. Arabica coffee is up 11% in 2022.
A light, consistent rain could improve the April cocoa crop, analysts say, but a sudden increase in rain followed by a dry patch could hurt it. A disappointing April crop, meanwhile, could indicate a weak main crop, which grows from October to March.
“If we see hot temperatures with no rain, this trend of [prices] moving higher is really going to continue,” said Mr. Mooses.
Chocolate makers are seeing high demand. Hershey Co., famous for Reese’s chocolates and Hershey’s Kisses among other products, said it is running low on Valentine’s Day candy this year. The Pennsylvania-based company said it added production lines and hired more workers but hasn’t been able to keep up.
At Anthony-Thomas Candy Co., a chocolate maker based in Columbus, Ohio, the cocoa supply contract will end soon, according to sales and marketing manager Nick Trifelos. Mr. Trifelos expects the next one will come at a higher cost.
“We’ve been told that it will be a change from what we’re used to,” Mr. Trifelos said. “We know that it will be a noticeable difference.”
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