Industry experts have been quoted as saying that, during 2009, the Cocoa industry has been going through it's "worst time for 25 years". So what went wrong? And what are the likely impacts?

Any impact is most likely to be felt in the confectionery industry which, unsurprisingly, absorbs around 47% of cocoa volume worldwide. This is according to a recent report from Euromonitor International which summarised the effects both of the economic downturn and supply issues.

Firstly, supply is highly concentrated, with some 70% of the 3.4 million tonnes of cocoa beans produced in 2006-7 coming from just three countries. Furthermore, says the International Cocoa Organisation (ICCO), Cote d'Ivoire alone is responsible for one-third of global production.

Secondly, cocoa cultivation is dependent upon some very specific climatic conditions. The cacao tree favours locations between 10 degrees latitude north and south of the equator, and a temperature range between 18 and 30° C.  Even the requirement of not too much sun, nor too much shade, limits options for cultivation at a local level.

Production followed an upward trend to 3.7m tonnes in 2007-8, but forecasts for 2008-9 peg volumes at a significantly lower 3.5m tonnes. The fall can be attributed to moves by farmers towards alternative crops. This diversification into products such as rubber, palm oil and rice has been taking place for some time, Why? These crops will often offer farmers a better income, and almost certainly one which is more consistent and stable.

Upward pressure on cocoa prices is nothing new, in July 2005, the price was $1,489 per tonne, in July 2009 this figure had risen to $2,791 per tonne, In fact, the price had peaked just over a year earlier at over $3,000 per tonne.

Chocolate Prices Rising

Industry experts have been quoted as

saying that, during 2009, the Cocoa

industry has been going through it's

"worst time for 25 years". So what went

wrong? And what are the likely impacts?

Any impact is most likely to be felt in

the confectionery industry which,

unsurprisingly, absorbs around 47% of

cocoa volume worldwide. This is according

to a recent report from Euromonitor

International which summarised the effects

both of the economic downturn and supply

issues.

Firstly, supply is highly concentrated,

with some 70% of the 3.4 million tonnes of

cocoa beans produced in 2006-7 coming from

just three countries. Furthermore, says

the International Cocoa Organisation

(ICCO), Cote d'Ivoire alone is responsible

for one-third of global production.

Secondly, cocoa cultivation is dependent

upon some very specific climatic

conditions. The cacao tree favours

locations between 10 degrees latitude

north and south of the equator, and a

temperature range between 18 and 30░C.

Even the requirement of not too much sun,

nor too much shade, limits options for

cultivation at a local level.

Production followed an upward trend to

3.7m tonnes in 2007-8, but forecasts for

2008-9 peg volumes at a significantly

lower 3.5m tonnes. The fall can be

attributed to moves by farmers towards

alternative crops. This diversification

into products such as rubber, palm oil and

rice has been taking place for some time,

Why? These crops will often offer farmers

a better income, and almost certainly one

which is more consistent and stable.

Upward pressure on cocoa prices is nothing

new, in July 2005, the price was $1,489

per tonne, in July 2009 this figure had

risen to $2,791 per tonne, In fact, the

price had peaked just over a year earlier

at over $3,000 per tonne.