Planning to gift a box of chocolates this Valentine’s Day? Well, you might want to think twice. The price of cocoa, the essential component of chocolate, has skyrocketed by over 100% since last year.
Cocoa, a regulated commodity trading on the Intercontinental Exchange (ICE) with the ticker CC, has seen its spot price shoot up to above $5,500 per tonne, doubling from a year ago.
West Africa, the source of three-quarters of the world’s cocoa, is experiencing supply challenges. The region’s leading producers, Ivory Coast and Ghana, are grappling with diseases and the dry Harmattan winds, which are adversely affecting crop quality and yield.
Ghana’s output is expected to hit a 13-year low, with Ivory Coast’s production at a seven-year minimum. To compound the issue, recent spikes in freight rates, particularly due to tensions in the Red Sea area, could disrupt international trade. This, in turn, would exacerbate the high cocoa prices, burden users, and potentially dent demand.
Chart: Cocoa Prices Are Skyrocketing, Turning Your Valentine’s Day From Sweet To Bitter
America’s Chocolate Consumption And Investment Opportunities
The U.S. boasts the largest chocolate market globally, with an annual valuation exceeding $20 billion. Concerning cocoa imports, the U.S. heavily relies on Canada (30%), Côte d’Ivoire (12.8%), and Mexico (10.1%).
Investing in cocoa-related exchange-traded funds (ETFs) that track cocoa prices is currently off the table for U.S.-based investors due to their absence on the NYSE Arca exchange.
However, investors can consider companies like Mondelez International Inc. MDLZ, which owns renowned chocolate brands such as Cadbury and Milka; The Hershey Company HSY, a leading confectionery manufacturer in the U.S.; and Lindt & Sprüngli AG, noted for its premium chocolates, although its primary listing is outside the U.S. LDSVF
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Image by Jill Wellington from Pixabay
