Where we’re at
Cocoa futures in New York and London are pricier than they ever have been in nominal dollars, surging past the highs seen in 1977 when the world was facing another cocoa shortage. Futures contracts traded in New York hit an intraday record of US$10,080 a metric ton on March 26 and have since been trading above US$9,500, while London beans are being in the £8,000 a ton range (about US$10,000). Before this rally, New York futures had largely remained below US$3,500 since the 1980s.
A steady rise in the price of cocoa beans over two years skyrocketed in March, with futures contracts more than doubling in three months to reach a level twice as high as the previous record. It’s a progression that has its literal roots in small West African farms but also involves climate change and the intricacies of the futures market. The latest surge has been driven in part by the kind of financial turmoil that can happen when commodities rise so fast that they overwhelm strategies meant to protect against such volatility.
The upshot is almost certainly bound to be more expensive chocolate that may come in smaller servings. But even if prices recede from current levels, they’re likely to remain elevated for years to come. Economists like to say that the cure for high prices is high prices, since they can reduce demand, spur increases in supply, or both. But the situation with cocoa shows how messy that idea can be in practice, given market complexities and obdurate physical facts like how long it takes for a new cocoa tree to grow.
