The Chaos with Cocoa

You might have caught wind of discussions surrounding the cocoa market lately. Let’s delve into some of the claims you’ve been hearing and explore the underlying reasons behind the volatility in cocoa prices. Most importantly, how will this impact your frozen dessert business?

The current market is experiencing unprecedented highs, with experts indicating a prolonged period without a quick correction. Projections suggest that prices may remain elevated for several years, influenced by various significant factors such as weather patterns, civil unrest, and the spread of diseases like swollen shoot. Recent reports indicate that Ivory Coast and Ghana, which collectively produce about 70% of the world’s cacao pods, have halted the sale of cocoa futures for the upcoming season due to declining production.

Efforts to address this shortfall are underway, with discussions about South America potentially stepping in to fill the gap. However, this transition is expected to take approximately 4-5 years.

Understanding the market dynamics further reveals significant challenges:

Firstly, it takes around 5 years for a cacao tree to mature and begin producing pods. When swollen shoot disease is detected, farmers cannot replant cacao trees on the same land for another 5 years, potentially resulting in a decade before a new tree yields pods. Environmental regulations then prevent farmers from replanting on new plots. Consequently, farmers are turning to alternative crops to supplement their income, with minimal motivation to replant cacao trees. While South America may emerge as a potential solution to the production deficit, the process will require several years to materialize.

The cocoa market is undergoing rapid fluctuations. For instance, we recently obtained a quote for cocoa in the fourth quarter of 2024, which was valid for just four hours. Five days later, when we required more, the price had surged by an additional 14.16%. Based on the quotes we’ve received, we anticipate that our cocoa costs will rise by approximately 40% or more for the year 2025.

This means that you can expect your chocolate mix prices to increase quite substantially in the coming future. All of your chocolate toppings (think: M&Ms, peanut butter cups, etc.) will also be affected by price increases if they haven’t already. Be prepared now and adjust your menu accordingly. While many stores currently do not differentiate in price between a chocolate and a vanilla cone, the cost to serve these two items will vary considerably.

We will provide further updates as more information becomes available.