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In the 2020-2021 growing season, Ghana and Côte d’Ivoire are predicted to have a 102,000 ton surplus of cocoa due to a decrease in cocoa purchases from Europe and an overall dip in chocolate sales. The International Cocoa Organization (ICCO) expects the price of cocoa to fall in Q2 2021, a position not held by some future traders who are looking at it from pure trend analysis.

ICCO Mar cocoa

Ghana and Côte d’Ivoire supply nearly 60% of the world’s cocoa and both countries have established a Living Income Differential in order to force corporations/buyers to pay a more equitable price for cocoa.

Since demand has decreased and these two countries are demanding higher prices for their cocoa, large corporations may look to other ways to source the cocoa in order to bypass fair wage policies, as Hershey’s did when it purchased directly from ICE – the futures exchange.

Some traders examining the forecast fundamentals, rather than trend analysis, agree that price pressure will apply because of the LID. It is not clear, however, where the chocolate companies would go to get a regular source of cheap cocoa if the underlying demand was there.

More than ever, chocolate companies are being required to meet new laws to evidence anti-slavery in their supply chain. These ESG credentials are impossible to obtain without the support of the local government, so at last, perhaps some of the power is shifting back to the producing countries.

Economics, as we know is a balance of supply and demand. When supply outstrips demand, the price moves up, and this is a founding equation of capitalism. With Ghana recently announcing that it will cease trading raw beans with Switzerland, they are in effect reducing the supply of beans in the market.

The predicted surplus stockpile of beans this year makes the math more complicated, but a combination of the LID, regulation, growth in Asia, and producing countries restricting the export of raw beans, are some reasons for a more positive longer-term outlook for farmers.


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