Coffee and chocolate prices are rising fast. Answers to key questions
Exchange prices for coffee and cocoa beans are breaking records: cocoa futures with delivery in March rose to $11,938 per ton. Confectioners, who had hoped to replenish their cocoa stocks thanks to this year's good harvest, are once again facing a shortage of raw materials and their skyrocketing prices. Coffee is not lagging behind - during the year, the popular Arabica rose in price by 80%, and the price of the Robusta variety more than doubled. What is the reason for the price rally and whether we should expect a slowdown in the price rise of these products - in Izvestia's answers.
What caused the price rise?
- Cocoa beans rose sharply in price at the beginning of the year on the background of crop failure in West Africa. The region, where 75% of the world's cocoa stock is produced, was badly affected by floods and the ensuing drought, which led to the largest ever shortage of raw materials on the market.
- In December, cocoa futures soared again as Africa began to talk about the risk of crop failure as a prolonged drought hit the continent. Chocolate producers found themselves in an even more difficult position than at the beginning of the year, because from May to August farmers predicted a good harvest, and in anticipation of more favorable prices for cocoa beans, many used up their stocks.
- The record rise in coffee prices is also due to climate change. Brazil, the largest producer of Arabica, experienced its worst drought in 70 years in August and September, and heavy rains hit the country in October. However, arabica is a very weather-sensitive tree that bears fruit at an average annual temperature of +20°C and good humidity. Short dry spells increase the number of fruits, but prolonged dry spells or above average temperatures reduce both yields and bean quality.
- The price rally for Robusta began last year. This more cold-, disease- and pest-resistant variety of coffee bean is used in the production of instant coffee. Vietnam, a major exporter of Robusta, is also suffering from the effects of climate change. Longer periods of rain and drought are forcing farmers to uproot coffee trees and grow other crops, and consumers are facing a shortage of raw materials.
- Global warming could halve the area suitable for growing arabica by 2050, according to research. Climate maps are used to calculate the most favorable places for growing coffee trees in the future, but it will take years for them to start bearing fruit. Meanwhile, global coffee consumption is growing and outstripping supply.
What else has contributed to the rising cost?
- The global shortage of fertilizer, which resulted from the Ukrainian conflict and subsequent sanctions, has reduced fertilizer use and the cocoa crop. In addition, West Africa faces the problem of aging trees: most bean growers are small farmers who do not have the money to buy new seedlings. In addition, young cocoa trees do not bear fruit until four years later, so planting new trees will not help to increase cocoa bean supplies quickly.
- Waterlogged soil has led to the spread of tree diseases, the most dangerous of which is called the viral disease of swollen cocoa shoots. Once symptoms appear, yields are reduced and the trees themselves die within four years. There is no cure for the virus, and even when diseased trees are cut down, the soil remains contaminated.
- The expansion of cocoa plantations is being hampered by the Cocoa and Forests Initiative (CFI), formed at the 2017 UN Climate Change Conference (COP23). The initiative brings together 36 leading producers of chocolate and cocoa products, which account for 85% of global cocoa consumption, as well as the governments of Côte d'Ivoire and Ghana. The solution involves not cutting down forests to make way for cocoa trees.
- The cost of coffee and cocoa can be affected by stock exchange speculation. The fact is that these products are traded on the exchange not in real terms, but in the format of futures contracts - preliminary agreements to buy at a certain time and at a fixed price at the time of the transaction. Speculators trading futures are essentially betting by predicting price changes. Such speculation can also cause a short-term change in the cost of raw materials on the market.
- According to experts, the impact of speculation on the price of coffee is insignificant, and the scarcity of coffee beans and the peculiarities of production have a much greater impact on the cost of the product. Between the farmer and the end consumer of coffee there is a whole chain of specialists who assess the quality of beans and determine their price. At the same time, the labor of farmers themselves often remains undervalued and the cost of labor is rising, which also makes this sphere less attractive for young people and affects the decline in production.
- Domestic laws of producing countries also influence the creation of market shortages. For example, Cote d'Ivoire, the main supplier of cocoa, including to the Russian market, banned the export of cocoa beans at the state level in order to save the raw material for loading its own processing factories. Now the country exports only processed raw materials.
How will the situation affect consumers?
- Coffee has already become more expensive in Russia, with wholesale prices rising faster than retail prices. Specialists expect that the cost of coffee beans will continue to rise. Chocolate producers compensated for the rise in prices by reducing the weight of the bar. Moreover, such a measure was used by confectionery factories all over the world.
- Large chocolate manufacturers usually have a certain stock of raw materials, which will allow them to avoid a shock increase in the price of products. The most expensive is bitter chocolate, which is considered elite and is made only from natural cocoa beans. This product will continue to rise in price. For the production of other types of chocolate in Russia, safe substitutes of cocoa butter are used, which allow to preserve the flavor qualities of the product.
In preparing the material "Izvestia" talked to:
- economist Igor Didenko;
- Anatoly Tikhonov, Director of the Center for International Agribusiness and Food Security of the Higher School of Management of the Presidential Academy.
Переведено сервисом «Яндекс Переводчик»
