Cocoa prices have begun simmering near a 45-year high after inclement weather in West Africa fostered the spread of the black pod disease and consequent snag in supplies.
Further spread of the black pod disease, which causes cocoa pods to turn black and rot, may impact the crop quality and production, resulting in a third straight year of deficit for the 2023-24 season.
Weak supplies from the Ivory Coast and Ghana - the world's first and second-largest producers of cocoa - have drastically trimmed the arrivals to global markets to 56,000 tonnes this season from 91,000 tonnes recorded last year. The price rally in the commodity has also affected demand in the international markets. In the third quarter of 2023, cocoa demand dropped 18 percent, and is yet to show signs of any recovery in the fourth quarter.
In October, the prices of cocoa increased by 10 percent, while the price of the commodity has flared up nearly 64 percent over the past year.
Unfavourable climatic conditions on the West African coast, largely because of the El Niño, are believed to be main reason for the damage to cocoa crops. This is the first time since the mid-1970s, when erratic climate conditions damaged the harvest, driving the prices to such high levels. In 2016, the prices hit a 12-year high when the crop suffered major collateral damage from another bout of the El Niño.
The cocoa prices scaled 46-year highs early in June, stoked by a fall in production. Excessive rain on the Ivory Coast led to flooding of many cocoa fields, damaging the main crop that begins in October. Incessant rain in the region also upset the drying process for cocoa beans that was collected around summer.
Soaring cocoa prices has set the chocolate prices zooming in the festive season. With major festivals, including Diwali, Halloween, and Christmas, lined up back to back, limited supply of raw materials for chocolates and candies - cocoa and sugar - due to unfavourable weather in West Africa and in India - is only expected to further flare up the prices of the end-products. This is anticipated to hit the consumption as well in a market grappling with inflation.
India, the world's second-largest sugar exporter, placed sugar in a restricted category last year until October 31, 2023, to prevent uncontrolled export of sugar and with a view to ensure sufficient availability of sugar for domestic consumption at a reasonable price.
On October 18, the Director General of Foreign Trade (DGFT) in India extended restrictions on the export of sugar beyond October 31, until further orders.
Domestic prices of sugar have been elevated, up nearly 2.5 percent in October, compared to a month back, according to Ministry of Consumer Affairs data. The Consumer Price Inflation (CPI) for the commodity was recorded at 4.73 percent in September.
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