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Record cocoa prices are prompting chocolate buyers to postpone orders and attempt to renegotiate pricing, according to chocolate maker Barry Callebaut.
Cocoa prices have almost tripled in the past year as extreme weather and disease have hit harvests in Ivory Coast and Ghana, which together produce two-thirds of the world’s cocoa.
Three consecutive seasons of global cocoa deficits had pushed prices to “astronomical levels”, said Oran van Dort, commodity analyst at Rabobank, adding that there was a risk of another deficit in the upcoming season.
“The expectation . . . since the initial [price] rally took off has been that prices will be passed on to consumers, either directly through higher chocolate prices, or indirectly as manufacturers utilise shrink[-flation] and skimpflation strategies,” said van Dort.
Switzerland-listed Barry Callebaut said on Wednesday it had sold less chocolate in the three months to November 30 but still managed to increase sales revenues, which analysts attributed to the company passing on higher costs to customers.
The group, whose customers include chocolate makers Hershey, Lindt and Mondelez, sold 565,000 tonnes of chocolate in the three months to November 30, down 2.7 per cent from the same period in 2023 and below analyst expectations of 568,000 tonnes. Sales revenue rose 22.6 per cent to SFr3.45bn ($3.8bn) over the same period. The company blamed the decline in volumes partly to pricing negotiations and to “short-term consumer reaction to higher prices”.
The steep rise in cocoa prices has increased liquidity challenges across the sector, particularly through margin calls — the additional capital traders are required to put up to maintain positions in the futures market.
As prices soar, traders and companies hedging their cocoa costs are required to deposit more funds to cover the increased value of their positions, tying up liquidity that could otherwise be used for operations or investment.
The pressure on chocolate companies is not likely to ease soon, according to Jonathan Parkman, co-head of agriculture at commodity broker Marex.
Years of depressed prices have eroded cocoa farmers’ ability to reinvest in their land, leaving vast swaths of plantations reliant on ageing, underperforming trees that struggle to withstand pests and unpredictable climate conditions.
“Very significantly, the trees seem unable to sustain any period of adversity,” said Parkman. “In any season you’re going to get weather that’s sometimes good, sometimes poor. But now, when we’re getting the poorer weather, the trees are unable to bounce back, they’re unable to regenerate yields and production drops away very quickly.”
Barry Callebaut’s shares had fallen 7.9 per cent by early afternoon on Wednesday, ranking it among the worst performers on Europe’s benchmark STOXX 600 index.
