Major African cocoa production plants halt over world crisis: summary
What we know
- Major cocoa plants in Ivory Coast and Ghana, the world's leading cocoa producers, have either halted or significantly reduced processing due to their inability to afford to purchase beans. This disruption in the cocoa supply chain is expected to lead to a surge in chocolate prices globally.
- Chocolate manufacturers have already increased prices for consumers in response to three consecutive years of poor cocoa harvests, with a fourth anticipated in the two countries that collectively contribute nearly 60% of the world's cocoa.
- Chocolate production relies on processors to transform cocoa beans into butter and liquor, essential ingredients for making chocolate. However, these processors are now citing financial constraints, stating that they cannot afford to purchase the cocoa beans.
- Transcao, a state-controlled Ivorian bean processor and one of the nine major plants in the country, has declared a halt to bean purchases due to soaring prices. While it continues processing existing stock, insiders suggest that the plant is operating at nearly idle capacity.
- In Ghana, the second-largest cocoa producer, most of its eight plants, including the state-owned Cocoa Processing Company (CPC), have intermittently suspended operations for weeks since the start of the season in October. CPC disclosed that it is operating at approximately 20% capacity due to the scarcity of beans.
What they said
Steve Wateridge, a cocoa expert from Tropical Research Services, emphasised the need for substantial demand reduction to align with the supply challenges, pointing to the critical imbalance in the market. He said, “We need massive demand destruction to catch up with the supply destruction." Meanwhile, two undisclosed sources revealed that even global trader Cargill faced challenges in sourcing beans for its primary processing plant in Ivory Coast, leading to a temporary shutdown for about a week last month. Cargill has not responded to requests for comments, Reuters reports.
