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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
A bite, or two, of chocolate and a sip of latte is a much welcome comfort, particularly in stormy times. Loathe to cut back, coffee aficionados and the sweet-toothed are understandably peeved by the rising cost of their daily fix. The price of cocoa — the raw ingredient used by chocolatiers — is at a record high, having risen almost 400 per cent since the start of 2023. Confectionery companies are exploring alternative ingredients, like carob and lab-grown versions. But nothing quite tastes like the real deal. Coffee bean prices have increased by multiples too, leaving espresso-addicted Italians in a froth.
Climate change is mostly to blame. Abnormally bad harvests are depleting stocks and pushing up global agricultural commodity prices: prices of sugar, tea and oranges have also jumped in recent years. Erratic rainfall and higher temperatures in West Africa have led to poor cocoa yields. The Ivory Coast and Ghana are responsible for around 60 per cent of the global supply of the chocolate ingredient. As for coffee, hot weather in Brazil — a major producer of arabica beans (the softer variety) — has stoked supply concerns. That follows three consecutive years of a deficit of robusta beans, due to drought in Vietnam, the biggest producer.
Bad weather has been compounded by other complications, including a global fertiliser shortage, caused by the war in Ukraine, and the spread of the cocoa swollen shoot virus, a root disease. Climate, geopolitics and pestilence are, of course, beyond the control of individual policymakers in cocoa and coffee trading nations. But what can they do to help?
The mantra “first, do no harm” comes to mind. Contentious public interventions have only pushed chocolate and coffee prices higher. The Ivory Coast and Ghanaian governments set the price for their cocoa producers. Right now growers are being paid well below the prevailing global price. Analysts reckon this has discouraged production and contributed to chronic under-investment in cocoa farms, which has left yields more vulnerable to weather fluctuations and disease. It has also incentivised smuggling to less regulated markets.
In places where cocoa farmers operate in more liberalised markets, production has been steadily increasing. Growers in Ecuador and Brazil are investing in agritech and higher quality seedlings, and both countries have set ambitious plans to boost future exports.
The EU’s new deforestation law has been another hurdle for farmers. The well-meaning regulation bans goods made with commodities grown on deforested land from being sold in the bloc. It was due to be implemented at the end of last year, but has been delayed for another 12 months given uncertainty over how it applies. Europeans, the world’s biggest coffee-drinkers, have responded by frontloading bean purchases as they grapple with the legislation, which requires them to prove their coffee imports do not come from deforested areas. This rush to buy has exacerbated the sharp uptick in bean prices over the past year.
The EU law clearly warrants clarification. Its delay should be used to help small farmholders meet traceability requirements. And though the Ivorian and Ghanaian government both recently boosted cocoa farmgate prices, they should do away with price controls.
For coffee lovers, there is light ahead. The World Bank forecasts both arabica and robusta bean prices to fall in the coming years as production picks up. It also projects a 13 per cent drop in cocoa prices this year. The climate will remain a source of volatility. But if lawmakers reflect critically on their shortcomings in the recent price surge, supplies will improve. After all, the world’s insatiable appetite for cocoa and coffee — and the nose-wrinkling taste of substitutes — ensures there is every reason for farmers to keep investing.
