As 2023 draws to a close, the market's focus on cocoa futures has suddenly increased in recent days. Based on the year-to-date increase of this commodity, coupled with the characteristics of cocoa price transmission lag, the market is generally worried that global chocolate may usher in a more violent wave of price increases in 2024.
By the close of trading on December 28, the most actively traded London cocoa futures edged higher to £3,551/tonne, up more than 70% for the year.
According to statistics, the annual increase in London cocoa futures in 2023 is also the historical peak of relevant data since 1989. Echoing London, New York cocoa futures also saw the highest year-to-date gains over the past 20 years.
In a report this month, Rabobank noted that cocoa production in the current quarter was 160,000 tonnes less than consumption.
Compared to the 70% increase in cocoa futures, it is enough to show the seriousness of the problem. Assuming that by the time producers such as Hershey and Nestle run out of stocks during the low price period, the price of cocoa futures will not fall significantly, then a sharp rise in chocolate prices will be inevitable.
The mainland chocolate products market is relatively small
Chocolate has been in the Chinese market for more than 60 years, but the mainland chocolate products market is still small overall. According to Statista data, the sales scale of chocolate products in mainland China in 2019 was 3.410 billion US dollars, an increase of 4.76% compared with 2018, and the annual sales are expected to reach 3.537 billion US dollars in 2020 and 3.765 billion US dollars in 2023. In terms of consumption, China's consumption of chocolate products reached 253,130 tons in 2019, an increase of 1.43% over 2018, and the annual consumption in 2020 slowly increased to 253,580 tons, and it is expected that the consumption will remain at about 250,000 tons by 2023.
As for when the price of cocoa futures will fall, Megan Fisher, an analyst at Capital Economics, believes that at least after the new crop is harvested in October 2024. Some analysts believe that West African farmers need to be given more time to react, so the high level of cocoa futures may continue until 2025.
Of course, there is one thing that chocolatiers need to consider when raising prices: chocolate, although sweet, is still an optional consumer product. More than 40% of consumers said they would cut back on chocolate and confectionery if inflation rose further, according to a survey by data firm NIQ.
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