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00:00Cocoa prices surged in 2024 and was the best-performing commodity for the year.
00:07This was driven by concerns over poor weather conditions in West Africa as bean volumes
00:12at export facilities fell below the five-year average.
00:15As a result, chocolate makers are increasingly turning their attention to alternatives like
00:21lab-grown cocoa, while some are seeking approval to buy huge amounts of beans on the IC Futures
00:27Exchange.
00:28Ted George, Chief Narrative Officer at Kiosk Advisory, joins me to discuss the wider implications
00:33for the cocoa industry this year.
00:35Ted, thank you for joining us and happy new year to you.
00:39Happy new year as well.
00:40It's good to be back.
00:41All right, let's get right to it.
00:42You and I had several conversations last year on the cocoa market and some of the highlights
00:46were, of course, adverse weather conditions, we had a bean disease, of course, and of course
00:50we had challenges with the cocoa board in Ivory Coast and of course Ghana, a myriad
00:55of problems that we saw, of course, prices surging in 2024.
00:59So let's start with 2025.
01:01It looks like some key players like chocolate makers are already trying to take some steps
01:07to hedge against any potential supply disruptions this year.
01:12What are your highlights?
01:13What do you see ahead?
01:14Yeah, absolutely.
01:15I mean, I think the thing is prices are still eye-wateringly high.
01:19We saw in April last year they went over £10,000 sterling a tonne.
01:23That's the first time that ever happened.
01:26And that translated into cocoa being one of the best commodity performers in the year,
01:30because in November there were fresh worries about supplies.
01:32We saw prices go up to almost £10,000.
01:35And even though they have weakened a bit, they're probably around £8,700 at the moment.
01:39That is two to three times where they were 18 months or two years ago.
01:43So it makes sense that a lot of the chocolate producers and the traders in the middle as
01:47well, they're trying to find alternatives to cocoa or ways of using less cocoa in chocolate.
01:53And so I think the thing is that we are going to still see chocolate there on the shelves.
01:56It might be a bit more expensive, but they're looking at also using other replacements for
02:00cocoa butter.
02:01There's quite a few other things that you can use as well.
02:03Less cocoa in there, maybe even trying to source actually a lot more from Latin America
02:07and some of the big producers there like Ecuador.
02:10Right.
02:11Speaking about those other producers, because I saw a report from the World Bank saying
02:15that cocoa prices are projected to ease by approximately 13% this year.
02:21And they mentioned the fact that there will be additional entrants and new entrants into
02:24the market to sort of cushion the effect of any supply disruptions coming from West Africa.
02:30What are your thoughts on that?
02:31Well, I mean, we all hope that prices will come down.
02:3413% is a fair amount, but considering how high they are, it means they're still going
02:38to be very high.
02:39I think the problem is that I just finished a series of missions to West Africa, the four
02:44largest countries there as well, and it was not possible to see the whole cocoa sector.
02:48It's pretty clear from what everyone says that the crop is as good as last season or
02:53maybe slightly better.
02:54But last season was disastrous in Ghana and Cote d'Ivoire.
02:57And so this strong rebound that everyone expected isn't happening.
03:01There are some areas where there's good cocoa production, but it's going out of the country
03:04so fast because there's so much demand.
03:07So I think the reality is, even though it looks like it has been a better season than
03:10last so far, ultimately, there's such a demand for cocoa and we're nowhere near what we were
03:15producing a few years ago, we're going to see prices remaining high.
03:18And even if they are 10%, 20% lower as we go into the rest of this year, that's still
03:23more than double where they were only a short while ago.
03:26How concerned should we be for weather conditions this year for the crop?
03:31Well, we have the second part of the double whammy.
03:34We had El Niño, which is that weather event which affects weather patterns around the
03:38world that had huge impacts, particularly on West Africa, Southern Africa as well.
03:42We've now switched back into La Niña, which has in some ways the opposite effects.
03:46And in fact, one of them is causing incredibly strong winds in California, which have really
03:50fanned that disastrous fires in Los Angeles.
03:53But what it tends to mean for West Africa is more rain.
03:57That can be good.
03:58But if you get too much rain for things like cocoa, you get black pod disease.
04:01It's great for Southern Africa.
04:02They produce huge amounts of maize there.
04:04That could be good for the crop, but it tends to be dry in East Africa.
04:08So we could find fresh drought there.
04:09I think the basic point is with climate change, and we've just seen that the world last year
04:13for the first time ever, on average, was over 1.5 degrees, which was the point we shouldn't
04:18get above.
04:19I think essentially there's so much unknown out there, all we know is that La Niña is
04:23going to cause disruption.
04:24But what we get from the weather, it just means that's overhanging all of the soft commodity
04:28sector at the moment.
04:29Right.
04:30And because of this unknown, this big unknown, like we mentioned earlier, some are cocoa
04:35chocolate makers.
04:36I'd like to talk about that.
04:38Some are seeking permission to purchase significant amounts of cocoa beans on IC Futures.
04:44Let's paint a scenario here.
04:46What happens if they're able to do that?
04:48Well, I mean, they can on certain levels.
04:50It's just that very often when it comes to the big chocolate manufacturers, they actually
04:54outsource a lot of this to the trading houses who sit in the middle.
04:57Enormous companies like Barry Cai, Bo, Cargill, Olam, that most people have never heard of,
05:01and they handle billions of dollars of cocoa every single year.
05:04They often do the hedging for them.
05:06So this project that I'm involved in for the ICCO is to set up an Africa cocoa exchange.
05:11And our idea is we want the cocoa to be traded in Africa.
05:14You can get African prices and the ability to hedge as well, which is so important with
05:18the different products that can come from that as well.
05:20The potential for futures as well.
05:22So I think basically when all of the different market out there is trying to find ways to
05:27reduce the risk.
05:28But I think actually, if you look at the big chocolate companies in the trading houses,
05:31the way they're trying to do it is actually build a relationship with the farmer.
05:35They want to make sure that when the farmer does produce the beans, they sell it to them
05:38and not on the open market.
05:40And everyone is making that effort to really make a connection with the farmer and the
05:43cooperative.
05:44Well, some are looking at the prospect of lab-grown cocoa.
05:48How do you feel about that, and how feasible is this?
05:51Well, I mean, if you think, what does it mean, lab-grown cocoa?
05:54Are you saying, oh, they're going to try and develop new varieties, et cetera?
05:57Great.
05:58That could work.
05:59But you need it at plantation scale.
06:00You know, the size that you would need if you need to produce, let's say, another million
06:04tons.
06:05You need hectares and hectares and hectares.
06:06So I think everything about looking at new varieties, hybrids, accidentally it was discovered
06:12in Israel because they had to evacuate an area.
06:14They left some cocoa trees extremely dry.
06:16And the ones that actually survived, they realized, are drought-resistant.
06:19So there's a whole series of different varieties that can come in, better husbandry, use of
06:23biopesticide and not vicious chemicals.
06:27All of that can help, ultimately.
06:29But it comes from the plantation.
06:30That's where we're going to get the cocoa and from the millions of farmers who depend
06:33on it.
06:34Speaking about plantation and farmers, last year in places like, I think, between Ghana
06:38and Cote d'Ivoire, a lot of the land were repurposed for illegal mining.
06:44I think that will be in Ghana.
06:45I mean, talk to us about what you're hearing on the ground in terms of how the government
06:50plans to support.
06:51I know you've talked about the African Cocoa Exchange and the support to farmers, but very
06:56crucial for new beans and new plantations to spring up to help support the production
07:03of cocoa.
07:04Well, absolutely.
07:05An illegal goldmine, or galamsey, as it's called in Ghana, is a real problem.
07:10Certain regions have been devastated, because when you go in to try and get the gold, which
07:14is underneath, you basically wash away all the soil and you use things like mercury to
07:17extract it.
07:18So the whole soil is destroyed.
07:20It cannot be used for any agriculture, and particularly not for cocoa.
07:23It also poisons water resources, et cetera.
07:26But the root cause of all unsustainable activity is poverty, and this is the big issue.
07:30If farmers don't think they're getting a good price for their cocoa, they say, I'm going
07:34to sell my land to the galamsey, and I'll make some money.
07:36And if you think, there are fixed prices in Cote d'Ivoire and Ghana.
07:40Farmers are getting around 3,000 euros a ton, roughly.
07:43In comparison, in Nigeria, they're getting around 6,000, 6,500.
07:47In Cameroon, more than 8,000, and those are liberalized markets.
07:51And so the problem here is the economic incentive.
07:53We've got to make sure there's an incentive for the farmers to invest in their farms and
07:56definitely stamp out things like illegal mining, because they cause huge destruction.
08:00Yeah, they certainly do.
08:01Thank you so much, Ted, for talking to us today.
08:03Good to have you back with us on the show.
08:05Ted George, Chief Narrative Officer at Cleo's Advice, looking at the outlook for the cocoa
08:09market this year.