26th April 2018
On Friday evening last week, we had a remarkable moment of technological globalization in my Accra home–what students who have taken my Globalization class at UW Bothell might recognize as an example of time-space compression. I was sitting upstairs here at my desk, speaking on the phone to Joe Weisenthal at Bloomberg Television in New York. Downstairs, my partner was watching the program “What’d You Miss?” on Bloomberg, and listening to me speak on the segment, “What’s behind the surge in cocoa prices?” The sound signals of the conversation between me and Joe bounced back and forth between Ghana and the US, and when they arrived on our television screen here, they were accompanied by images of me, my new book, Cocoa, price graphics, farms, and factories.
I decided to extend the information loop once again and write a post recapping my explanation of cocoa’s recent price rise for “What’d You Miss?”, and give an update on what’s happened between Friday and today. In just a few days, there is more to add to the story.
When I was putting the final touches on my Cocoa manuscript last year, the ICCO Quarterly Bulletin of Cocoa Statistics forecast a surplus for the 2016-17 cocoa season, which turned out to be correct. To understand why we had a surplus (which means that the total amount of cocoa grown that season was more than was needed for grindings during the same period), we need to look back at what was happening the year before.
About halfway through 2016, an El Niño cycle came to an end. El Niño cyclesalternate with La Niña cycles; El Niño is the “warm” cycle and La Niña is the “cool” cycle. As climate change makes El Niño cycles harsher, that translates into drought conditions here in West Africa.
Cocoa needs rainfall to flourish. During the most recent El Niño cycle, drought conditions in Ivory Coast and Ghana meant that the world’s two largest producers were not supplying as much cocoa as usual. This shortened supply had kept cocoa’s price pretty high for several years, above $3000 per metric tonne. Cocoa’s price remained high even as world market prices for other food commodities fell (not to mention the price of oil, which lost 50% or more after 2014).
But then the El Niño cycle ended, and favorable conditions for growing cocoa returned in West Africa. Trees produced more fruit, more cocoa was loaded onto container ships in Ivory Coast and Ghana, and a surplus loomed. This newly heightened supply happened to coincide with a weaker-than-expected demand for chocolate (as measured through the proxy of cocoa grindings). These two conditions–abundant supply, low(er) demand–have only one price outcome: a fall.
Source: Dr.Kristy Leissle, ChocoBlogby Dr. Chocolate
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