Good news for chocolate lovers in South Africa

South Africans with a sweet tooth will have noticed a significant spike in the prices of chocolate over the past year – but relief might be just around the corner, with markets betting on the global cocoa shortage coming to an end.

According to the latest inflation data from Stats SA, while food price inflation has moderated in the past few months—now sitting at 4.7% in May, unchanged from April—not all subcategories have enjoyed the same levels of disinflation.

Coffee prices, for one, have climbed 18% year on year. But as an entire category, sugar, sweets, and desserts have continued to far outstrip the average, with 15.5% price growth year on year.

More specifically, the average price of a chocolate slab now sits at R23.14, Stats SA said, about R3.00 (or 14%) more costly than the R20.00 level seen in May 2023.

Prices for chocolate slabs have risen by 7% in 2024 alone, with the trajectory showing even more pain when taking a longer-term view: prices have shot up over 63% from R14.15 recorded in 2017.

The main driver behind the climbing prices stems from a surge in global cocoa prices.

Prices surged to a record high of US$9,733/ tonne late in March 2024 and topped US$10,051/ tonne in April as inclement weather decimated yields in major production areas.

Market analysts have noted that cocoa prices have been rising for the past three years and hit a 46-year high in 2024.

Cocoa-producing nations of West Africa—the world’s top growing destination—have been hit by El Niño weather, which has been exacerbated by diseased crops and geopolitical tensions between Ukraine and Russia impacting the fertiliser markets.

While yields have been reduced as a result, global demand has continued to advance, leaving global markets with a supply/demand mismatch and much higher pricing.

However, a recovery in cocoa production in the world’s largest growers is set to put an end to a massive bean shortage, according to commodities broker Marex Group.

The group expects cocoa output to top demand by 303,000 metric tons in the upcoming 2024-25 season, which starts in October. This would mark the first year of surplus after three straight seasons of deficit.

According to Bloomberg analysis, cocoa futures in New York more than doubled in the past 12 months as supply shortages significantly drained global stockpiles.

The stockpiles held by both New York and London futures exchanges are expected to run out by the end of the year, with a cocoa production deficit of between 650,000 to 700,000 tons this season.

“That’s higher than the 439,000-ton shortage forecast by the International Cocoa Organization, as crops in Ivory Coast and Ghana have suffered from bad weather and disease. Marex has pegged this season’s shortfall at 475,000 tons,” the group said.

However, the expectation is now that output will rebound on the back of improved weather conditions in West Africa.

“The development of new the crop is looking strong,” said Jonathan Parkman, head of agricultural sales at Marex.

Wetter weather in West Africa has already helped to push cocoa prices down from all-time highs hit earlier this year, Bloomberg noted.

Also helping pricing is that cocoa demand is also expected to be weak, with the main effect of extreme higher cocoa prices this past year subduing demand over the next six months.

(With Bloomberg)

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