Global demand for cocoa has increased, but supply falls short. This has forced cocoa farmers to raise prices, and Ghana and Ivory Coast, two major cocoa producing countries, have decided to increase their state-guaranteed cocoa prices by 50%.
Cocoa is in short supply not only due to rising demand but also because unfavorable weather and crop diseases have reduced yields. As cocoa becomes harder to grow and supply remains limited, demand has continued to rise, making cocoa increasingly scarce. To address this, Ghana and Ivory Coast have raised state-guaranteed cocoa prices. This increase was necessary to incentivize farmers to continue growing cocoa; otherwise, reduced farmer participation could have further disrupted the global cocoa market.
By raising prices, Ghana and Ivory Coast have been able to fairly distribute profits to cocoa farmers and discourage smuggling, which may help increase supply and stabilize prices. However, this is only a temporary solution. While higher prices might encourage farmers to reinvest in crop maintenance, they don't address the core issue of improving yields. If crop health problems and unfavorable weather persist, production will remain constrained, and prices will continue to rise.
Therefore, sustainable solutions beyond price increases are essential to stabilize supply and support the livelihoods of those dependent on cocoa production. To secure the future of the cocoa industry, it is vital to tackle the root causes of shortages by improving cocoa varieties, enhancing farming practices, and developing resilient agricultural infrastructure. Governments and industry stakeholders must collaborate systematically to address these challenges.
When supply and demand don't align, price fluctuations are inevitable. However, price adjustments alone aren't always the solution. It's crucial to understand the root causes—whether supply can't meet demand or demand has dropped despite stable supply—to develop the right strategy for business success.
For more insights, visit Tridge’s Ghana and Ivory Coast Respond to Cocoa Supply Crunch with Price Hikes
