The current slump in cocoa prices may signal the start of a prolonged new phase in the market, according to Edward George, founder of Kleos Advisory.
Global cocoa prices have dropped sharply from their December 2024 peak of $12,906 per metric ton on the New York exchange and are now trading around $3,000 per metric ton.
This correction has had major implications for marketing systems in Côte d’Ivoire and Ghana, the world’s two largest cocoa producers, according to Ecofin Agency.
Both countries have significantly reduced farmgate prices, by 57% in Côte d’Ivoire and 28.6% in Ghana, to encourage the purchase of beans that have accumulated in producing regions. George warned that the crisis is far from over.
“The cocoa market has clearly entered a new cycle. Last year, beans were scarce. Today, there is plenty of cocoa available. This is not the first time we have seen this. Similar cycles have occurred roughly every 10 to 15 years. Unfortunately, history is repeating itself, this time with a very heavy impact,” he said.
George emphasized the need for deeper reforms. Beyond the price correction caused by increased supply, he noted weakening demand, particularly in major consuming regions.
“We are seeing a clear decline in cocoa grinding and usage in Europe, North America and Asia,” he said.
“Chocolate manufacturers are using less cocoa and developing alternative formulations, while the cost-of-living crisis is pushing households to cut back on confectionery purchases and eat out less often. According to the latest market estimates, a global surplus of around 200,000 metric tons is now expected, possibly more.”
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While short-term adjustments have eased pressures in Ghana and Côte d’Ivoire, George stressed they are not enough to manage the new market dynamics.
Ghanaian authorities are exploring a new financing model using domestic cocoa-backed bonds and aim to process half of the harvest by the 2026/2027 season.
“The implementation of a new financing system will depend on the position of the central bank, the Ministry of Finance and Parliament. There is also a legacy of poorly managed fundraising operations, which makes markets wary,” George said.
More broadly, he argued that cocoa governance needs reform not only in Ghana and Côte d’Ivoire but also in Cameroon and Nigeria, where markets are more open, to strengthen the sector against future shocks.
“We need a structural transformation,” he said, highlighting the potential benefits of an African Cocoa Exchange.
“The ICCO’s project to create an African Cocoa Exchange could play a key role by allowing prices paid to producers to better reflect local market conditions. Ghana and Côte d’Ivoire frequently stress the need to boost local processing, and here again an exchange could be decisive. Processors could turn to the platform to source beans when they cannot obtain them through traditional supply chains dominated by trading houses and multinational chocolate companies,” he added.
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