Globally, cocoa prices are reaching record levels. Maybe you’ve seen headlines pointing to a worldwide shortage of cocoa beans. Extreme weather, crop disease, and market volatility are all at play. The upside is our cocoa producing partners are able to earn better prices for their beans! In our latest blog post, Ron, our Cocoa Sourcing Manager, and Greg, our Chocolate “Sourcerer,” describe the current market evolution — and what it means for cocoa producers as well as for craft chocolate makers like us. 

What’s happening with world cocoa prices?

Let’s back up. Over the last few months, there’s been huge volatility in the commodity-cocoa futures market. The average commodity price for cocoa in 2023 was around $3.25 / kg. Today it’s at $10.73 / kg. At Dandelion, we operate under a model where our purchases are based on prices our producing partners believe to be appropriate, independent of the commodity market. In 2023, we paid an average of $7.86 / kg. That was more than double the market price at the time! Compared to today’s market price, it’s significantly lower.

Why are prices on the rise?

Essentially, it’s a case of supply and demand. Demand is growing, while over the last three years supply has been shrinking. Ghana and Côte d’Ivoire, which produce more than 60 percent of the world’s cocoa, have experienced lower than normal productivity due to climate change, disease, and older trees. As you might imagine, there’s no indication that these are temporary issues (and yet there’s reason to remain hopeful).

Ghana is seeing a decrease in production mainly due to black pod, a fungus that spreads quickly with heavier rains than usual. In Côte d’Ivoire, the decrease is mainly due to swollen shoot disease, which causes the stems and roots of cacao trees to swell, and is eventually fatal. Other producing countries are seeing production affected by shifting rain patterns and weather, due to the impact from an El Niño year.

Cocoa has always been a volatile market, in part due to its size compared to larger commodities like corn and soy. It’s not only that — a history of emerging markets, politics, civil unrest, speculators, agro-terrorism, under investment, and changing climate have affected the price of cocoa since the 1800s, when Central and South America grew the bulk of the world’s supply. By the 1930s, Africa had become the largest supplier. Some African countries began setting up cocoa boards to control exports and to set prices. After WWII, economies boomed, and so did cocoa prices — quintupling what they’d been before. 

The 1970s saw another upward spike in price, mainly due to production shortfalls in places like Ghana. Those price increases led to a boom in plantings across the world. That was almost 50 years ago. Cocoa trees start losing productivity in their 40s and 50s. As the growth cycle restarts, we expect there will be a lot of younger and more vigorous trees coming on line.

What does this mean for the cocoa producers we work with?

Overall, it means that many of them are getting more money for the work that they do! Our relationships with cocoa producers are based on trust and transparency (and, of course, great beans). That said, the cocoa market is not homogenous, especially given the current state of flux. Each producer is facing a different set of circumstances:

Countries With Large-Scale Production

While we don’t work with cocoa producers in Ghana and Côte d’Ivoire, these two West African countries produce the vast majority of the world’s cocoa — and the issues they’re facing are causing price volatility downstream. A cocoa board in each country sets farmgate pricing (the price a farmer is paid for their beans) annually, and most cocoa is sold based on contracts agreed upon many months in advance of harvesting and processing. Farmers are now being paid prices that were set months ago, so they’re not benefiting from the higher prices the rest of the world is seeing. Fortunately, amid the volatility, Ghana and Côte d’Ivoire each recently reset their farmgate price, increasing the amount farmers will get paid. But those prices still aren’t as high as the general commodity market.

To the east of Ghana is the country of Togo. Last year, we began sourcing beans from Togo while working with gebana, a Swiss company that has developed a cooperative farming network to bring Togolese cocoa to the world market. While Togo is a small-scale producer, Oskar Jönsson, Head of Cocoa Sales at gebana, tells us Togo is facing the same farming challenges hitting other parts of West Africa. “It looks like yields were down some 30 percent. At the same time, the farmgate prices rose much more than the decline in yields, as Togo does not have a capped cocoa price like Ghana and Ivory Coast. So we currently estimate that the farmers we work with have had a very good season overall,” Oskar says. On that note, keep an eye out for our first Kpalimé, Togo bar later this year.

Countries With Mid-Sized Production

We source our beans from several mid-sized producing countries, including Ecuador, Colombia, the Dominican Republic, Uganda, and Brazil. Buying beans from these countries is more intense and competitive than ever, in part to fill the gap in worldwide production. The bidding wars are good news for farmers. However, some of these countries are also facing challenges in an El Niño year, as wetter weather is affecting yields and shipping costs. Here we’re seeing the largest price increases, as there’s immense competition over wet beans. We and other craft chocolate makers are now competing with industrial chocolate makers, whose pockets run deep. However, having established long-lasting relationships with our partners means we’re still able to get beans, albeit at much higher prices than before.

Dr. Charles Kerchner, co-founder of Zorzal Cacao in the Dominican Republic, explains that while the current market volatility presents operational challenges, the price increases are beneficial to farmers: “In the short term, farmers receive more revenue — more money for improved livelihoods; big upside. In the long term, if prices remain high, it could be a game changer, as more money is invested in farms, sustainability, and potentially bringing back youth and interest in cocoa production.” We’ve been working with Zorzal Cacao since 2013. 

Countries With Small-Scale Production

We also buy beans from smaller producing countries, such as Tanzania, Vietnam, Thailand, Guatemala, Belize, and — as noted above — Togo. While there isn’t always as much intense competition (yet) in these countries, they can still sell their beans for much more than normal, so they’re looking to figure out what to do next. Do they sell on the open market at a high but volatile price with lower quality standards, rather than to existing customers? Or do they charge a bit more, keep the quality high, and preserve their customer base for the long term? It’s a tricky balance. We’re currently seeing both scenarios — some producers want to maintain relationships and keep quality high with a longer-term view, while other producers have decided to work with the open market for now; and some are doing both.

We’ve been partnering with Kokoa Kamili in Tanzania since 2013. Co-founder Simran Bindra says, “More farmers around the world are getting a lot more money for their cocoa, and that’s fantastic. I wish it had happened in a more controlled fashion, and there are still major concerns around ensuring that farmers in all parts of the world are seeing the full value of these higher prices.” He tells us farmgate prices in Tanzania have gone up three to four times in the last few months. “Of course, this means that managing cash flow becomes a much bigger challenge, but it also means that we’re getting more money into the pockets of the people who most deserve it,” he adds. We agree. 

How does this affect craft chocolate?

Regardless of what happens, it means that the price of cocoa will continue to go up for craft chocolate makers. And will there be enough beans available? The beans craft makers buy are now fair game for the industry as a whole. Higher prices are more tolerable to the larger industrial chocolate makers, who have a lot more money and can buy larger quantities. Craft makers might find themselves without any or as many beans to buy.

As an industry, we’ve always paid higher prices for better quality, but if farmers are already getting three or four times what they used to, is there any additional amount that will make it worthwhile to do the increased work needed for higher quality? Different farmers will feel differently on this point. On the positive side, in the years to come, new and emerging specialty cocoa producers will be equipped to take advantage of the higher prices.

What does this mean for Dandelion?

The best thing to come out of all of this is that many of the cocoa producers we’ve been working with for years are able to get better prices for their products. At Dandelion, we pay a premium price for high-quality cocoa — it takes more work to produce, and we’re happy to pay more for it. With commodity prices suddenly surpassing the amount we, on average, pay, we’ve been actively working with our cocoa producing partners to figure out how to navigate this. As the situation is constantly changing, with some producers, we’re seeing a 10 to 15 percent increase in price; with others, the price has more than doubled. It is nearly impossible to know what next year holds. Unfortunately for a few origins, it means they have nothing to sell to us, as all of their farmers are instead selling to “coyotes” (people who buy beans on the spot with cash and don’t expect to build long-term relationships). As we noted, the cocoa market is not homogenous!

We are currently working out a floor price for all beans that we purchase at Dandelion. In the future, we want to ensure that our producing partners have some stability, even if the market starts to drop again. We’ve often discussed how we can consistently get more money to farmers, but there hasn’t been a clear path. We think the path has shown itself to us now.

As always, relationships are at the heart of everything we do. We want to keep partnering with all of the amazing people we’ve been working with — some for over a decade — and strive to keep our business, and theirs, as stable as possible through tumultuous phases. We’ll continue to work together and figure out the best path through this maze of an industry. We remain hopeful that we’ll see a future where the market settles on a price much higher than it used to be, but isn’t quite so chaotic as to keep everyone up at night. We know it will get there.