The chocolate industry is grappling with severe cocoa shortages, prompting unexpected involvement from hedge-fund manager Pierre Andurand, renowned for his oil investments. By early March, prices had surged over 100% in just a year, leading many speculators to retreat.
The crisis was evident: decades of cheap chocolate, aging trees, and widespread crop disease in West Africa, the source of half the market.
Adverse weather exacerbated the situation, causing fears of long-term production decline. Cocoa futures spiked around 70% from March’s onset, reaching record highs.
For chocolate makers worldwide, the crisis is palpable, with plant closures from Malaysia to Germany and legal entanglements for firms caught off guard. Liquidity shortages signal further unpredictable price swings, risking company bankruptcies. 
Futures hit an unprecedented $10,760 per metric ton, doubling the 1970s peak, with Citigroup projecting prices soaring to $12,500 and Andurand forecasting over $20,000 this year.
The rapid price hikes have driven out many investors, unable to keep up with escalating margin calls. Trading in cocoa futures has dwindled to a 12-year low, leaving the market trapped between acute crop shortages and perilously low liquidity levels.
When firms fail to meet margin calls to support their hedges, they’re compelled to repurchase futures, driving prices higher and forcing more participants out of the market.
This distressing cycle mirrors recent events, such as the nickel downturn and the European natural gas price surge after Russia’s Ukraine invasion, affecting consumers, manufacturers, currencies, and economies.
Ivory Coast and Ghana, responsible for half of cocoa supplies, anticipate double-digit production declines. The severity prompts both nations to defer contracts to future harvests.
The International Cocoa Organization (ICCO) projects a 374,000 metric ton production shortfall for the 2023-2024 season, marking the third consecutive deficit.
Barry Callebaut AG forecasts a deficit of 500,000 tons, roughly a tenth of the global market, with expectations of another shortage next year.The concentration of cocoa production in Ivory Coast and Ghana exposes the market’s vulnerability to their crop conditions. 
For decades, farmers in Ivory Coast and Ghana have faced chronic underpayment. Despite nominal surges in futures prices, they haven’t kept pace with inflation.
This remains the case even 12 years after Ivory Coast nationalized its cocoa sector to enhance farmer livelihoods, a condition for receiving debt relief from the International Monetary Fund after the 2011 civil war.
Both countries’ governments determine prices offered to growers, setting them a year in advance. Consequently, growers receive significantly less than international market prices and lack the flexibility to respond to supply and demand fluctuations.
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