The low-down on the cocoa and coffee price hike in 2024
29/10/2024
2024 is turning into a record year for cocoa and coffee – but sadly not in a positive way. The International Coffee Organization (ICO) has reported huge surges in prices, with cocoa also hitting historical highs.
As buyers, our first concern on seeing costs go up might naturally be the impact on our own budgets. But it’s important to connect our buying decisions to the people who prop up the cocoa and coffee industries – farmers.
Understanding what’s happening for farmers in the Global South regions where these products are grown and in the supply chains is crucial context for these recent price hikes. It’s a situation we’re learning about via our social enterprise partners in the coffee and chocolate biz.
Informed by their insights, here we explain why prices have risen and what this means for farmers. Plus, discover how this Christmas gifting season offers a chance to give farmers the backing they deserve, as they navigate these challenging times.
Why is coffee and cocoa more expensive this year?
The climate crisis is hitting growing regions hard
It might not surprise you to hear the climate crisis is one of the major disruptive forces both cocoa and coffee farmers face right now.
West Africa is the primary cocoa-producing region. The impact of El Niño, the phenomenon where warmer ocean waters in the Pacific affect global weather patterns, is always felt here. But it’s thought to be exacerbated in recent times by climate change conditions.
Josh from Equal Exchange, a social enterprise sourcing chocolate and coffee from farmer cooperatives, tells us how disrupted weather patterns have impacted the cacao growing cycle and ravaged crops: “The harvests have become unpredictable and can start late and/or end early or come in a more abbreviated timeframe. In many cases our partners are experiencing heavier rainfalls and flooding during the rainy season and/or longer drought conditions during the dry season.
“This impacts floration, cocoa pod development and can increase the incidence of pests and diseases, which all lead to lower production volumes for farmers. For example, the main harvest in the Dominican Republic, which was earlier this year and a main source for our cocoa, was down 25% over the prior year.”
This latest poor yield comes off the back of two previous years of deficit supply. It’s added up to the most pronounced shortfall in modern the industry’s history.
There’s a similar climate story happening for coffee farmers, with 97% of all coffee globally grown in countries vulnerable to climate impacts. Brazil and Vietnam are two of the main coffee-producing countries that have suffered severe droughts and other extreme weather events. Just last month, the devastating Typhoon Yagi wreaked havoc on Vietnam’s key coffee-growing regions.
Compounding the problems of a changing climate is the poor condition of many ageing farms. This is down to a lack of investment – many farmers simply don’t have the money and resources to maintain the quality of their trees and soil. And when soil and trees are depleted, they’re less resilient against weather challenges and agricultural pests and diseases. The latter is especially hard to manage for those who can’t afford expensive pesticides.
Disruptions in the cocoa and coffee supply chains
These are also testing times logistically in the industry. Post-covid port congestion and shipping delays are still impacting the cocoa supply chain, as are rising prices of things like fertiliser and sugar.
In Ghana, illegal gold mining is taking over and degrading former cocoa farming land. Farmers on low incomes are either tempted into selling their land or are illegally pushed off.
The coffee supply chain is facing similar bottlenecks in transportation and escalating production costs. For instance, the Red Sea crisis has disrupted key shipping routes for coffee beans, forcing vessels to take a longer and more expensive route.
There’s also uncertainty for both industries around new EU legislation outlawing products sourced from deforested areas or that contribute to forest degradation.
In the background to these problems for producers is an increasing global appetite for coffee and chocolate. More demand from people in emerging markets around the world is exacerbating the supply deficit. Tony’s Chocolonely have called it The Chocopocalypse.
Higher costs, higher demand, lower wages
When the cost of coffee and chocolate surges in the global market and on supermarket shelves, it’s rarely farmers who benefit.
“Most of the profits are captured by intermediaries and speculators,” explains Birgitte Hovmand O’Connor, co-founder of social enterprise Chocolate and Love (pictured below). “Farmers often have fixed contracts that don’t account for market spikes, and they face increased production costs due to inflation.”
In Ghana and the Ivory Coast, where most of the world’s chocolate is grown, it’s the governments who set the price of cocoa before harvests.
“Going into the 2023/2024 harvest the farmgate price was around $1.62/kg,” says Josh from Equal Exchange. “The government raised this mid-year to $2.47/kg and at the beginning of October the government raised prices again to around $3.09/kg for the upcoming harvest.
“The market is currently trading in the $7,000-$8,000/kg range so with this new farmgate price, farmers in the Ivory Coast are getting maybe 40% of the market price. In contrast, our farmers typically get closer to 60-70% of the market price after accounting for the cooperative overhead, logistical and other business costs.”
So while speculators profit from the volatile market and big chocolate brands pass on increasing production costs to consumers, farmers lose out. Even when they are receiving a higher price, they may be selling far less cocoa due to losses from weather, pests and diseases.
How can you support cocoa and coffee farmers in the price crisis?
The answer to this is simple, really: buy better coffee and chocolate. As farmers face these exceptionally challenging conditions, shopping from ethical, sustainable suppliers is more important than ever.
Birgitte from Chocolate and Love expands on how this supports farmers in supply chains like theirs: “It helps protect them from the negative impacts of volatile markets. Our Fairtrade certification ensures farmers receive a guaranteed minimum price, safeguarding their income.
“Additionally, with our sourcing partner – who buys the cacao directly from the cooperatives – we reinvest into farming communities, offering long-term contracts, financial and technical support to help sustain their livelihoods.
“Our customers directly contribute to fair wages and stability of cacao farmers in these difficult times as with both Fairtrade and organic certification, we pay a premium to the farmers.”
Here in the UK, we might feel far removed from the farmers in places like Ghana and Brazil. But our purchasing decisions directly affect them and the market.
This price crisis also reveals the need to rethink our food systems more broadly. If we want to keep importing staple food products grown in countries vulnerable to the climate crisis, we must support farmers, promote resilient supply chains and do our bit to reach net-zero.
“Some cheap chocolate on the market uses palm oil, vegetable fats, more sugar and lecithin,” adds Birgitte about why we should be thoughtful about our chocolate choices. “So our recommendation is: eat real chocolate, Fairtrade and organic. Better for the farmers, better for the planet and better for the people who eat it. It really is a win-win.”
Corporate Christmas gifts that make a difference to farmers
With Christmas around the corner, your gifts for the team and clients are the ideal place to start with making more intentional, fairer chocolate and coffee purchases.
Our foodie hampers not only ensure you’re putting your money behind social enterprises supporting their farmers, but are a way to highlight these issues to your giftees. The Festive Feast, for instance, features Equal Exchange’s Organic Festive Blend Ground Coffee alongside a delicious mix of other do-good food and drink connected to building better food systems.
For something smaller, they can get to know more about Chocolate and Love’s mission via their Thank You Gift Box or personalise chocolate bars from Tony’s Chocolonely.
Other chocolate gifts that will open their eyes to the world of social enterprise chocolate are The Hygge Hot Chocolate gift box, Love Cocoa’s Luxury Advent Calendar and Harry Specters’ impactful twist on the classic Christmas selection box.
These might just be seasonal gifts, but they represent something much bigger. As Josh reflects, the relationships social enterprises and those in their supply chain build with farmers create long-lasting impact.
“We invest in increased productivity, improved quality and stronger cooperative businesses so that our farmer partners are better positioned to be resilient in the face of a changing climate and unstable market conditions,” he says. “It ensures they’re able to have better livelihoods and build stronger communities.”
Head to the Team Gifting Platform to find even more chocolate and coffee Christmas gifts that do right by farmers. We’re available to chat if you want to know more about the brands and the impact they create for growers.